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Silver ETFs and Equity index Funds lead passive charge in Jun-24

15 Jul 2024 , 09:46 AM

If there is one big trend in India post the pandemic, other than the rise of retail participation in mutual funds, it is the phenomenal rise in passive funds story. In terms of the folio growth and the AUM growth, the passive funds have become a sort of preferred asset class for the Indian investors. The reasons are not tough to apprehend. After all, it is not just about active fund managers struggling to beat the index. It is also about the simplicity, elegance, flexibility, and intrinsic diversified nature of these passive funds. Beyond all these factors, Indian investors are learning the basic rule of Jack Bogle that “Costs Matter.” In India, the total expense ratio (TER) of passive funds is approximately lower than active fund by 100 to 150 bps and that makes a huge difference in the long run, as it gets compounded.

The result has been a perceptible shift of investors from active funds to passive funds. The India passive funds story can be divided into 4 segments viz. index funds, index ETFs, commodity ETFs and fund of funds (FOFs). Today, passive funds account for 17.14% of the AUM of the mutual fund sector overall and about 15.97% of the overall MF folios. The AMFI data on a monthly basis, focuses in depth on the passive funds at a granular level, which is a recent addition to the AMFI data pool since April 2023. Here, we shall look at passive funds (index funds, ETFs and FOFs) in terms of past returns, category wise AUM and category wise folios growth for June 2024, as compared to the data for June 2023.

HOW INDEX FUNDS AND INDEX ETF PERFORMED IN JUNE 2024

How did the overall universe of active and passive index funds and ETFs (except FOFs) perform in term of returns on a 1 year basis and since inception. We have considered regular plans data for the rankings. There are 356 index funds and ETFs overall in the mutual fund universe in India, with a combined AUM of ₹10,25,182 Crore. Here the Top-20 funds on returns since launch.

Passive Fund
Scheme Name
1 Year (%) Returns Launch (%) Returns Daily AUM
(₹ Crore)
UTI Nifty 500 Value 50 Index Fund 88.97 85.18 416.4
Kotak Nifty Smallcap 50 Index Fund 68.64 75.55 82.24
Motilal Oswal Nifty Microcap 250 Index Fund 72.77 74.36 1,250.89
HDFC NIFTY Smallcap 250 Index Fund 60.96 69.35 250.42
ICICI Prudential Nifty PSU Bank ETF 62.27 68.22 72.09
Motilal Oswal BSE Enhanced Value Index Fund 90.05 65.55 737.36
Motilal Oswal BSE Enhanced Value ETF 93.15 64.64 102.59
Kotak Nifty 200 Momentum 30 Index Fund 66.81 64.46 268.43
HDFC NIFTY Midcap 150 Index Fund 55.39 61.34 191.59
HDFC NIFTY Smallcap 250 ETF 62.71 60.49 405.58
HDFC NIFTY Midcap 150 ETF 57.16 54.69 45.14
UTI BSE Housing Index Fund 55.91 52.00 27.87
Edelweiss Nifty Midcap150 Momentum 50 Index Fund 75.56 49.24 508.23
ICICI Prudential Nifty Auto Index Fund 60.80 47.87 143.78
Tata Nifty Midcap 150 Momentum 50 Index Fund 73.73 45.20 447.91
HDFC NIFTY200 Momentum 30 ETF 68.37 44.72 64.22
Edelweiss Nifty Smallcap 250 Index Fund 61.60 44.45 70.79
SBI Nifty Smallcap 250 Index Fund 61.31 43.86 940.22
ICICI Prudential Nifty 200 Momentum 30 ETF 68.57 43.36 242.64
HDFC BSE 500 Index Fund 37.69 42.25 143.68

Data Source: AMFI

The family of passive funds have a total of 356 funds across equity generic index funds, equity sectoral index funds, as well as debt index funds and ETFs. These 356 passive funds manage total AUM of ₹10,25,182 Crore as of July 12, 2024. Over a 1 year period, the average return of these 356 passive fund stands at an impressive 31.44%, despite including equity and debt index funds. If you look at these 356 funds in terms of returns since inception, then the average returns stand at an impressive 18.51% on a CAGR basis.

HOW FUND OF FUNDS (FOF) PERFORMED IN JUNE 2024

How is the overall universe of active and passive fund of funds (FOFs), both domestic and global, in term of returns on a 1 year basis and since inception. We have considered regular plans in this case. There are 121 fund of funds (FOFs) overall in the mutual fund universe in India, with a combined AUM of ₹1,05,881 Crore. Here the Top-20 fund of funds (FOFs) on returns since launch.

Passive Fund
Scheme Name
1 Year (%) Returns Launch (%) Returns Daily AUM
(₹ Crore)
Axis NASDAQ 100 FOF 34.57 41.88 181.12
Mirae Asset Global X Artificial Intelligence ETF FOF 30.30 37.67 336.99
Axis Silver FOF 28.37 30.26 45.04
HDFC Silver ETF FOF 27.97 29.76 101.18
Mirae Asset Nifty India Manufacturing ETF FOF 57.80 29.15 107.93
ICICI Prudential India Equity FOF 49.61 27.84 126.8
Aditya Birla Sun Life Multi – Index FOF 39.98 27.22 16.05
Mirae Asset Equity Allocator FOF 37.48 26.74 858.11
Mirae Asset NYSE FANG+ ETF FOF 58.85 26.35 1,619.26
Motilal Oswal Nasdaq 100 FOF 36.73 24.81 5,268.75
Edelweiss Gold and Silver ETF FOF 24.61 24.60 103.8
Motilal Oswal Gold and Silver ETFs FOF 24.19 23.63 83.71
Nippon India Passive Flexicap FOF 39.37 23.18 247.41
Invesco India – Invesco EQQQ NASDAQ-100 ETF FOF 35.10 22.99 424.57
UTI Gold ETF FOF 23.43 22.83 103.89
Edelweiss US Technology Equity FOF 33.22 22.55 2,359.20
ICICI Prudential BHARAT 22 FOF 71.22 22.54 1,723.36
Axis Equity ETFs FOF 39.35 22.12 22.13
Nippon India Asset Allocator FOF 34.42 21.73 240.79
Nippon India Nifty Next 50 Junior BEES FOF 67.23 20.53 467.67

Data Source: AMFI

The family of fund of funds (FOFs) have a total of 121 funds across equity, debt, domestic and international FOFs. These 121 passive fund of funds (FOFs) handle total AUM of ₹1,05,881 Crore as of July 12, 2024. Over a 1 year period, the average return of these 121 fund of funds (FOFs) stands at an impressive 22.94%, since this includes equity and debt index FOFs, as well as domestic and international FOFs. If you look at these 121 FOFs in terms of returns since inception, then the average returns stand at a more subdued 12.03% CAGR, which is still above average.

PASSIVE FUND FOLIO GROWTH: JUNE 2024 OVER JUNE 2023

While folios represent the investor accounts, the AUM is a mix of flows and market value appreciation. There have been concerns that retail has not taken to passive funds with the same enthusiasm as active funds. However, the folios growth still tells a very poignant story. We will look at both the parameters; but first we focus on the folio growth. There are 13 categories of passive funds as identified by AMFI, but the “Other domestic ETFs”, category was dropped due to zero folios. The table below compares the folio numbers of the remaining 12 categories of passive funds as of end June 2024 over June 2023.

Passive Mutual Fund
Schemes (Folios)
 Folios Jun-24
(in Numbers)
 Folios Jun-23
(in Numbers)
Growth
(%)
Silver ETF 3,23,321 1,03,680 211.85%
Equity oriented Index Funds (Domestic Index Funds) 82,38,364 40,41,888 103.82%
Fund of funds investing overseas in Passive Funds 7,13,800 4,44,927 60.43%
Equity oriented ETFs (International ETFs) 4,60,624 3,14,699 46.37%
Other Index Funds 76,489 56,520 35.33%
Equity oriented ETFs (Domestic ETFs) 1,19,42,455 98,34,862 21.43%
Income/Debt Oriented ETFs 21,81,294 18,71,290 16.57%
Gold ETF 54,09,986 47,52,363 13.84%
Income/Debt Oriented Index Funds (TMIF) 1,54,211 1,45,988 5.63%
Equity oriented Index Funds (International Index Funds) 2,46,484 2,35,622 4.61%
Income/Debt Oriented Index Funds (Ex-TMIF) 14,924 15,743 -5.20%
Fund of funds investing overseas in Active Funds 7,39,481 9,03,152 -18.12%
Total of Passive Funds 3,05,01,433 2,27,20,734 34.24%

Data Source: AMFI (TMIF is target maturity index funds)

The above table compares the folios at the end of June 2024 with the folios at the end of June 2023 (12-month growth). Here is what we infer.

  • Passive fund folios yoy growth in June 2024 stood at 34.24%, compared to 32.40% in May 2024. That is a lot of investor intensity in last 12 months. The total folios of passive funds stand at 305.01 Lakh folios as of end June 2024; compared to 296.43 Lakh folios in May 2024, 287.09 Lakhs folios in April 2024, and 279.63 Lakh folios as of March 2024.
  • Which is the specific category of passive fund that led the growth. The leader was silver ETFs, a recent addition, which saw folios growing 211.85% over June 2023. That is fantastic growth in 12 months, although the base was relatively small.
  • The other 3 categories of funds that saw good traction were equity oriented domestic index funds with folio growth of 103.82%, FOFs investing in passive funds growing folios at 60.43%, and equity oriented international ETFs growing folios at 46.37%.
  • Which were the laggards in this folio growth list? On the downside, the FOFs investing in overseas active funds continued to see a sharp fall in folios by -18.12% while the income oriented index funds (other than TMIFs) saw contraction of -5.20% in June 2024.

As of June 2024, out of the 12 categories of passive funds with active folios, 10 categories saw accretion in folios over June 2023; with 8 of them growing folios in double digits.

PASSIVE FUNDS AUM: JUNE 2024 OVER JUNE 2023

The table below captures the assets under management (AUM) of the 12 categories of passive funds with active AUM as of the close of June 2024. Unlike folios, AUM is a mix of fresh flows and market cap accretion. It measures heft, more than retail intensity.

Passive Mutual
Fund Schemes
AUM Jun-24
(₹ Crore)
AUM Jun-23
(₹ Crore)
Growth
(%)
Silver ETF 7,473.34 1,880.80 297.35%
Equity oriented Index Funds (Domestic Index Funds) 1,26,019.16 60,400.34 108.64%
Gold ETF 34,355.75 22,339.38 53.79%
Equity oriented ETFs (Domestic ETFs) 6,25,712.30 4,40,413.58 42.07%
Fund of funds investing overseas in Passive Funds 8,417.50 6,118.27 37.58%
Equity oriented ETFs (International ETFs) 11,852.16 8,984.07 31.92%
Equity oriented Index Funds (International Index Funds) 4,758.33 3,705.89 28.40%
Income/Debt Oriented ETFs 99,547.18 87,594.53 13.65%
Income/Debt Oriented Index Funds (Ex-TMIF) 14,841.62 14,281.49 3.92%
Income/Debt Oriented Index Funds (TMIF) 94,409.91 93,375.39 1.11%
Fund of funds investing overseas in Active Funds 17,469.88 17,751.12 -1.58%
Other Index Funds 3,452.94 3,704.92 -6.80%
Total of Passive Funds 10,48,310.08 7,60,549.77 37.84%

Data Source: AMFI (TMIF is target maturity index funds)

We have compared AUM of the 12 passive fund categories (with active folios) for June 2024 over June 2023. The share of passive funds in AUM fell below 17% in May 2024, but has bounced back to 17.14% in June 2024. .Here are key takeaways from the passive AUM data.

  • AUM of passive funds grew 37.84% in June 2024, compared to 32.86% in May 2024 on a yoy basis. Much of the accretion in the AUM has obviously come from Nifty and Sensex touching all-time highs. June saw the election uncertainty abating with Modi 3.0 in place, and that has substantially helped in the AUM growth in the month.
  • Index ETF AUM of domestic ETFs touched ₹6.26 Trillion and it has emerged as the single largest contributor to the overall mutual fund AUM. In fact, the equity index ETF AUM is also the largest class of fund in India in terms of AUM.
  • The leader of the pack in terms of AUM growth in June 2024 over June 2023 was led by silver ETFs, a recent addition, which saw AUMs growing by 297.35% yoy. The other categories of passive funds that saw good traction in the last 12 months were domestic equity index funds at 108.64%, Gold ETFs at53.79%, equity oriented domestic ETFs at 42.07%, and FOFs in passive overseas ETFs at 37.58%.
  • On the downside, miscellaneous index funds saw AUM contraction of -6.80% while FOFs investing in overseas active funds contracted -1.58%. Out of the 12 categories of passive funds with existing folios, 10 categories of passive funds saw AUM accretion while 2 categories saw AUM contraction. Eight of these passive funds grew in double digits.

The growth in passive AUM has come on the back of index accretion, as the Nifty and Sensex touched new lifetime highs amidst the end of political uncertainty. Like in the last 2 months, June 2024 also saw passive funds returning as the flavour of the month.

KEY TRENDS THAT COULD BOOST PASSIVE FUNDS

India has seen a big shift to passive investing post pandemic. To encourage this trend, there are two key trends. One needs to see the net impact of big names like Zerodha and Jio-Blackrock planning a pure passive-only approach in India. But more important would be the trend of SEBI planning index lite regulations for pure passive funds. If that happens, it could be a game-changer and trigger massive growth in the passive investing story in India!

Related Tags

  • AUM
  • GoldETF
  • IndexETF
  • IndexFunds
  • MutualFunds
  • PassiveFund
  • SIlverETF
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