Here is what happened at the Cafemutual Passives Conference 2025!

Cafemutual successfully organized its annual event on passives: Cafemutual Passives Conference 2025 at Taj Santacruz, Mumbai. The event hosted 10+ sessions from about 20 reputed speakers including SEBI Whole Time Member (WTM), senior AMC officials and distributors.

 Here is a summary of the sessions at the event.

Marketing Passive Funds to Investors

Speaker: Prem Khatri, Founder and CEO, Cafemutual

• Just like how MFDs market the possibility of alpha creation while pitching active funds to investors, they should focus on marketing market linked returns from passives
• For sceptical investors, MFDs can point the inconsistencies in active fund returns and low-cost structure to pitch passives
• For opportunist investors, MFDs should point out the novelty and popularity of passives
• For pragmatist, consistency and cost-effective nature of passives can be highlighted 
• MFDs should focus on goals over performance and sell the power of lower costs which could increase their returns 
• Passives should be the core strategy for goal planning with mutual funds

The Rise of Passive Investing

Speakers: Ankit Singhania, SVP - Head, Passive Strategies, UTI MF, Arun Sundaresan, Head - ETF, Nippon India MF & Pratik Oswal, Head - Passives Motilal Oswal MF

Moderated by: Koel Ghosh, ED, MSCI

• Consistency of performance is the biggest challenge in active funds
• Passives have grown at a CAGR of 34% in the last 10 years 
• 28% of the fresh flows last year have come in index funds 
• The definition of passives has moved beyond Sensex and Nifty broad indices in the last 5 years 
• Passives give you access to markets which were not accessible through traditional mutual funds 5 years back 
• Factor funds act as bridge between active and passive funds which give benefits of alpha generation and disciplined investment
• The biggest hurdle in the path of passives is low awareness among investors
• Active ETFs offer diversification while attempting to beat the benchmark 
• Target maturity funds offer better benefits than a bank FD at a low cost

Regulatory perspective on Passives

Speaker: Amarjeet Singh, SEBI WTM

• The TER in index funds and ETFs is well below their regulatory limits
• For a 3-year period, 43% equity schemes in direct mode underperformed their benchmark as of February 2025
• Finding active funds that outperform the market is difficult 
• The methodology related to index construction should be transparent and not have any conflict of interest 
• Passive and active funds serve different investor needs and can co-exist
• MF Lite framework aims to foster innovation and ease of compliance to open MF space to new players with light touch regulations
• SEBI is collaborating with AMFI to reduce front running and market abuse 
• AMCs are required to maintain clear communication and ensure that principle of suitability is not compromised for AUM

Navigating the Future – Emerging Trends in Passive Investing

Speakers: B Gopkumar, MD & CEO, Axis MF, D.P. Singh, Dy. MD & Jt. CEO, SBI MF, Swarup Mohanty, Vice Chairman & CEO, Mirae Asset Investment Managers (India), Vishal Kapoor, CEO, Bandhan MF,

Moderator- Prem Khatri, Founder & CEO, Cafemutual

• Passives is a high volume, low margin game
• So, profits are by-products and investor centric behaviour should be the focus of MFDs
• This is the first time in India that three generations are investing at the same time which gives tremendous scope for growth for the industry 
• There is a trend in the younger generation to use passives to enter the MF fold which is enhancing the growth of the industry 
• It is possible for multiple players to coexist in active and passive space 
• Matching products with customers by distributors can lead to many years of growth 
• There is still a need to educate investors to enable fund houses to launch more sophisticated passive products
• A combination of thematic and factor funds will continue to do well as they satisfy investor needs
• MFDs should not look at passives just as a fancy option but allocate them based on their needs
• The development of a fee only model can motivate more distributors and advisors to treat active and passive funds in the same way 
• A greater focus on investor needs can lead to a higher wallet share 
• MFDs need to wake up to the reality that other asset classes can also satisfy investor needs 
• Passives can give higher volumes which can compensate for the lower margins 
• The newer MFDs may choose active equity in the beginning but they cannot ignore passives due to their high growth rate

The Indian Passive Fund Landscape

Speakers: Ashutosh Singh, MD & CEO, Asia Index Pvt Ltd, Deepak Yadav, Head - Passive Business, Aditya Birla Sun Life AMC, Harsh Roongta, Founder, Fee Only Investment Advisers LLP, Krishan Mishra, CEO, FPSB India

Moderator- Nishant Patnaik, Associate Editor, Cafemutual

• EPFO allocating towards ETFs in 2015 gave passives an initial push
• Government supported ETF schemes like Bharat ETF series and CPSE ETF were also very important for the passive category 
• Target maturity funds can offer up to 70-80 basis points higher return compared to bank FDs
• During the sharp correction due to COVID, passive funds started becoming an option for the investors 
• Factor index funds are performing better than benchmark over a long term which makes them a good alternative to equity funds 
• Indexes are created by finding gaps in broad markets and knowing the voice of investors 
• Passives can help to give better risk-adjusted returns
• Equity markets today bounce back very quickly due to which funds with cash holding in active schemes struggle sometimes to generate alpha
• Entire portfolio cannot be passive and should instead be based on risk appetite and financial goals of the investors 
• MFDs should also learn financial planning to ensure a successful career 
• MFDs need to learn about the need and rationale for choosing passives before using them in their client portfolios 
• Passives can help to increase longevity of client investment with passive and make more revenue in the long term compared to active equity funds 

Effective Client management

Speaker: Limesh Parekh, MD & CEO, Enjay IT Solutions

• While clients and transactions are increasing, margins are decreasing which makes operational efficiency important for distributors 
• MFDs need technology to ensure such efficiency and improve client relationships 
• CRM software can help MFDs to efficiently handle client requests and also allow prioritisation of service requests from investors with higher portfolios

My Experience with Passives – Building a Successful Business with Passives

Speakers: Sooraj Raveendran, Founder, Index Funds Sahi Hai, Mehul Shah, Founder, RIQR

Moderator- Nishant Patnaik, Associate Editor, Cafemutual

• Sooraj believes in selling PMS and mutual funds in fees only model
• He built basic technology and then collaborated with AMCs primarily focused on passives to grow his business 
• He also recommends factor funds to complete a passives only portfolio 
• Mehul says low exit load, easy profit booking and low cost makes passive funds a good choice for his clients 
• Passives give a good option to MFDs to pitch a low cost, safe fund to HNIs
• He offers ETFs to his direct equity investors for better risk-reward option 
• He believes that HNIs are more aware about passives than retail investors 

Designing Low-Cost, High-Impact Portfolios Using Passive Funds

Speaker: Chintan Haria, Principal Investment Strategist, ICICI Pru MF

• Passive investment also requires a control over emotions by investors and distributors 
• The 500-stock universe of broad Nifty and BSE indices is a good starting point for passives 
• Debt part of the portfolio can be constructed with index funds 
• Equity portfolio can be constructed using mid and small cap index funds 
• Sectoral part of the portfolio can be used to generate alpha through FoFs which also provide tax efficient returns
• Momentum factor funds can be a part of the portfolio of aggressive investors 
• Gold can be given 10% part of portfolio through SIPs 
• Investors should have 5% of their portfolio in silver as it is also a long term investment due to its use in solar panels

Mechanics of ETFs

Speaker: Anubhav Srivastava, Managing Partner, Aryzen Capital Advisors LLP

• iNAV allows investors to track the price of an ETF during the trading hours 
• Once an ETF is launched, an AMC gets units in exchange of stock 
• If the underlying security of an ETF is liquid, such a scheme has better liquidity 
• Authorised participants create and redeem units based on arbitrage opportunities
• AMC, authorised participants, market makers and stock exchange provide liquidity 
• Authorised participants use these situations to create arbitrage 
• MFDs should focus on liquidity of underlying security and not the liquidity of the fund

Operation Sindoor & its impact on your client's investments

Speaker: Karan Datta, Thinker, Investor, Speaker

• Geopolitical tensions increase risk but also create opportunities in the markets
• It is also important to look at the fixed income segment during times of geopolitical conflict 
• A terrorist attack can lead to 0.5% reduction in GDP and 2% reduction in investment 
• The safety of the country opens the door to a powerful economy