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Cafemutual successfully conducted the 3rd edition of Cafemutual Passives Conference (CPC) on May 10, 2024 at Taj Santacruz, Mumbai. The event hosted 25+ esteemed speakers with individual presentations and panel discussions where the experts shared their insights on the latest trends in passives. Here are the key highlights of the various sessions held at the event:
Time to take an active look at passives
Speaker: Prem Khatri, Founder & CEO, Cafemutual
- Cost efficiency, performance consistency, transparency and lower maintenance make passives an interesting proposition for the investors
- Passives can help MFDs in client acquisition and retention due to their stable performance compared to actives
- Passives can also help in risk diversification of the portfolio
- They have long-term sustainability due to their increasing popularity and share in MF AUM
- Passives can also help MFDs in increasing their wallet share and profits due to increased ticket size
Reimagining your business model
Speakers:
- Alok Kumar, Head - Alternate Products, Aditya Birla Sun Life MF
- Ankit Singhania, Vice President - Specialist Passive and Hybrid Strategies, UTI MF
- Ashish Shah, Founder, Wealth First Portfolio Managers Ltd
- Pratik Oswal, Head - Passive Funds, Motilal Oswal AMC
- Umesh Kumar Daila, Head - ETF Sales, Mirae Asset MF
Moderator: Koel Ghosh, Head of Strategic Initiatives, ETF Junction
- Recent popularity of passives has made AMCs start thinking about the incentives offered by them in the long term
- Passives are generating alpha while giving good risk-adjusted returns
- Passives also have options like smart beta funds that create alpha over and above the benchmark index
- Passives can be used for various investment strategies due to the options they provide like debt, equity, smart beta etc. Hence, they can complement a client's portfolio for various market conditions
- The drawbacks of active funds in comparison to passives are that they require conviction from investors over a long period of time and require fund managers to consistently outperform their benchmark
- MFDs still lack awareness about ETFs. Retail investors are also avoiding ETFs as they find them very complicated and it is necessary to simplify them
- Passives reduce the chances of client dissatisfaction compared to active funds
Embrace Change and Adaptability
Speaker: Deborah Fuhr, Managing Partner and Co-founder, ETFGI
- Recent economic crisis has made a lot of investors move towards ETFs
- 58 months of consecutive net inflows in the US market
- Biggest challenge for MFDs is to find good funds that generate alpha
- Institutional investors, financial advisors, retail traders, portfolio managers, fund selectors are key investors in ETF
Case for Gold
Speaker: Juan Carlos Artigas, Head of Research, World Gold Council
- Gold has outperformed many global asset classes like bond markets in the last few years and has given returns comparable to the stock markets
- It is a good asset for risk diversification as it has low correlation with stock markets. Gold also offers good liquidity
- This is a good time to invest in gold as interest rates are predicted to come down
- The consumer demand has also reduced, which can bring down the prices
Smart Beta: Passively Active
Speaker: Siddharth Shrivastava, Head - ETF Product, Mirae Asset MF
- Smart beta funds show cyclicity as they target certain market behaviour. Different smart-beta factors can outperform other factors during different market cycles
- Smart beta ETF AUM has grown considerably in the recent years across the globe
- Different smart beta factors can enhance distributor’s portfolio by making it more risk averse (low volume factor), more tuned to current market trends (alpha ETF) and fill in gaps in a strategic asset allocation
- A portfolio with a combination of smart beta funds can be used an alternate to actively managed funds to improve its return-to-risk profile
How to Build Portfolio using Passive Funds
Speaker: Vikash Wadekar, Head - Passives, Axis MF
- Passives have grown over 16% in the last few years
- Passives offer exposure to every corner of the market with options like sectoral and thematic funds, thematic funds, factor funds etc
- Passive funds will also help MFDs to win the confidence of the investors as the market of passives becomes bigger
- Blending passives with actives has major advantages like reduced volatility, overall cost reduction and manage underperformance
- Blending actives with passives can have higher alpha potential
- MFD has to spend less time and make less choices while dealing with passives
Future of Distribution
Speakers:
- Mukesh Agarwal, CEO - Indices and Data, NSE Indices
- Navneet Munot, MD and CEO, HDFC MF
- D.P Singh, Deputy MD and Joint CEO, SBI MF
- Prem Khatri, Founder and CEO, Cafemutual
Moderator: Dhirendra Kumar, CEO, Value Research
- The passive market lacks enough MFDs
- MFDs should focus more on getting passive folios of high value to increase their revenue
- Passives is a rapidly growing market
- Direct plans are contributing more to passives AUM
- B30 cities have also shown good growth in passives
- Active and passive funds will always coexist with special channels in the future where passives will see great growth
- Index funds are a good addition to a MFD’s portfolio as they are more transparent and a low maintenance product
- Good inflows in recent times have made MFDs recommend index funds to their clients
- There is a huge scope for fund generation index funds for the next two decades
- Investors have evolved a lot over the years when it comes to mutual funds
- Marketing campaigns have also increased popularity of mutual funds
- Investors will eventually learn the benefits of compounding and opt for less risk prone investment options
- Tremendous efforts will be needed by MFDs to further optimize the potential of the MF market
My Experience with Passives
Moderator: Nishant Patnaik, Associate Editor, Cafemutual
Kaushik Deva, CEO, Kredere Wealth Partner Pvt. Ltd:
- Being low cost was a chief reason why fixed income funds appealed to investors
- ETFs can be used to capture the mood of the market
- Passives makes much more sense than actives in terms of stability and providing risk diversification to the client
- Smart beta funds can consistently outperform the broad based index
- While HNIs are realising the importance of passive funds, retail investors still lack awareness about passives
- Passives is the way forward. MFDs cannot afford to ignore passives in the long term
- AMCs should keep looking for factors that give superior returns and educate the investors on it
Milan and Sanjay Patel, Individual MFDs:
- Historically, Index funds have doubled investors’ money in 5 years
- Commission increased due to bigger ticket investments
- Retail investors rely on MFDs to invest in passive funds
- MFDs should look at ETFs and index funds for investors
- MFDs should stop thinking about revenue as passives give high revenue due to bigger ticket investment
Thematic Investing in 2024: Big Tech, Big Medicine, Big Ideas
Speakers:
- Aman Singhania, Head - New Product Development, NSE Indices
- Amit Arora, Co-head, Retail Sales, Bandhan MF
- Arun Sundaresan, Head - ETF, Nippon India MF
- Gurjeet Singh Kalra, Business Head - Passive Funds, DSP MF
- Shaily Gang, Head - Products and Alternates, Product Development, Tata MF
- Vikash Wadekar, Head - Passives, Axis MF
Moderator: Prem Khatri, Founder and CEO, Cafemutual
- Percentage of passive AUM has gone up from 8% to 17% in the last 5 years
- Index funds have become appealing to investors in the sectoral and thematic segment
- There is not enough availability of stocks for fintech funds
- However, a fund with lower proportion of fintech can be an option
- A lot of multicap funds can incorporate technology or renewable energy sector with an active portfolio
- Investors can still outperform passive benchmarks by investing in passive funds
The Art of Selling Passives
Speaker: Nishant Patnaik, Associate Editor, Cafemutual
- Distributable TER of various index funds is good which makes them economical viable for an MFD
- ETFs gives an opportunity to enter clients’ balance sheet
- MFDs should not compare actives and passives
- MFDs should give global perspective to investors to encourage investors to start investing in passives
- MFD should look at overarching theme to sell passives. For instance, MFDs can say invest in India, if they recommend NIFTY 500 Index
- MFD should first understand investors and highlight the benefits of passive funds accordingly
- Smart beta funds give an edge to the investment portfolio of your clients
- MFDs should look at taking tactical calls through passives
