As Indian investors are warming up to the idea of passive investing, many new and upcoming mutual fund players are planning to offer only passive funds to investors.
Among the numerous fintechs and PMS firms in the process of starting mutual fund business, Zerodha and Angel Broking have confirmed that they will sell only passive schemes.
While Zerodha is awaiting mutual fund license from SEBI, Angel Broking is in the advanced stage of applying for the regulator's approval.
Zerodha said it sees opportunity for a pure passive AMC in India. "Very few active managers have consistently added value. Having said that, at the end of the day most investors aren't concerned about alpha. They are looking for simple, transparent, and easy to understand products that can help them fulfill their long term goals like retirement. We think there is a space to offer such simple products," the company said.
Angel Broking will be using the rule-based investment approach to offer smart passive products to investors. "A combination of our smart beta funds and passive ETFs (Exchange Traded Funds) would cover the complete investment needs of any investor at far lower costs, enabling new customers to experience equity with ease," said Prabhakar Tiwari, Chief Growth Officer, Angel Broking.
Passive investing has gained momentum in India in the last one year or so. There have been a plethora of index fund and ETF launches in recent months. NSE has 100 ETFs listed on its platform and 21 one of them were launched in the last one year alone.
The AUM of index funds doubled in the last calendar year from Rs 7,944 crore to Rs 15,359 crore. Also, the AUM of ETFs (excluding gold) rose 46% from Rs 1.75 lakh crore to Rs 2.57 lakh crore.
