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The industry’s first passive conference stood tall on its promises and proved to be an engaging and uplifting platform for MFDs, RIAs and AMC officials interested in exploring ‘the next frontier’ in the mutual fund industry — the passive space.
A strong line-up of speakers engaged in discussions and delivered their views on the future of passive funds, the ways to utilise them for asset allocation and the business potential for distributors. We have tried to capture some key highlights from the event for our readers. Here they are:
'Liquidity window under consideration for ETFs'
SEBI's Whole-Time Member Ananta Barua said that a liquidity window is under consideration by SEBI to make it easier for investors to buy and sell ETFs easily and at the right price.
He also shared three steps that can make ETFs a popular offering among the masses. "Investor education programs on ETFs, enhancing liquidity by making large investors buy and redeem ETF units through exchanges rather than directly from fund houses and incentivising market makers can go a long way to make ETFs a better product," he said.
'Active funds are failing to beat the benchmark'
Most of the speakers at CPC 2022 agreed that many active funds are not really doing the job of generating alpha not only in developed economies like US but also developing countries like India.
"Investors across the world are finding it difficult to find active funds which can beat the benchmark. Last year, 86% active funds failed to beat the benchmark," said Deborah Fuhr - Managing Partner, Founder and Owner, ETFGI.
'New guidelines for passive funds to come soon'
As per Radhika Gupta, CEO of Edelweiss MF and the vice chairperson of AMFI, the industry body is working to bring new guidelines for passive funds in India.
"We are expecting to roll out tactical regulations for these schemes soon which will make the passive space better in India," she said.
'Passive bhi sahi hai'
Speakers at CPC 2022 expressed the need to launch a campaign on the lines of 'mutual fund sahi hai' for passive funds. Given the low cost structure and simplicity, the speakers said that they believe that passive funds can strike a better chord with investors as against active funds.
"We need to create a message for new investors that they should look at passives as a starting point. Regular consistent messaging that 'passives sahi hai' can lead to better adoption of index funds and ETFs," said Hari Shyamsunder, the CEO of Navi MF.
'Active plus passive'
At the conference, there was a consensus that an active+passive strategy is the right formula in the present scenario rather than going for just active or passive.
According to speakers, the two investing styles complement each other. "Asset allocation was difficult earlier due to gaps on the product side. Passives have plugged those gaps. For example, investors can now easily invest in international markets through the passive route," said Pratik Oswal, Head-Passive Funds, Motilal Oswal MF.
'Look at tracking error'
Experts at CPC 2022 advised MFDs and RIAs to look at tracking error while recommending passive funds to clients. They said that expense ratio and the fund size are other factors that can help determine the right fund for investment.
