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.
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.
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!
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