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Passives is a large and growing space which is becoming popular by the day. It has also expanded its offerings across categories - debt, equity, and commodities. In this context, Ashwin Patni, Head Products and Alternatives, Axis Mutual Fund answers some of the most relevant questions for MFDs.
Should MFDs look at passives now?
First and foremost, it is not an either-or decision. MFDs should find the right mix of actives and passives depending on clients’ objectives and offer a complete package.
Passives are powerful, they offer transparency as you know the index constituents and that the portfolio will replicate that. Therefore, there is no alpha uncertainty. There is clarity not only on the portfolio that investors will get but also on maturity if it’s a target maturity product. It becomes easier to forecast how it will play out for your investors as opposed to a more complex strategy.
Do ETFs make business sense?
MFDs should take a holistic perspective of these products. It is not fair to expect every product to make the same revenue. Certain things which are necessary for serving clients’ entire needs and are in their best interest should be done. Revenue will take care of itself as clients will have more faith and confidence in you.
What are the risks associated with passives?
There are multiple categories of passives across market caps and sectors. There should be a clear understanding of the right mix of market cap and sectoral products. Decisions without proper research or calls taken on recent performance give rise to risks.
Just like actives, there should be efforts backed with research to select the right index, the right fund manager and understand why a particular product is being selected.
Why has Axis Nifty 100 become popular?
It is important to be quick and nimble while offering innovative products. Axis Nifty 100 is a representative of what the fund house wants to do in the passive space.
The large cap space is essentially the top 100 and Axis Nifty 100 is ideal for investors who want a comprehensive large cap product. Over the long term, Nifty 100 gives complete coverage of the large cap segment and benefits from the stocks that are at the next level of growth and are potentially going to get included in the nifty 50 over time.
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