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Many relate passives to indexes and ETFs but there exists a range of passive products that can help build a modern and profitable distribution business. In this context, Cafemutual hosted a panel of industry experts at Cafemutual Passives Conference 2022 (CPC 2022) who shared their views on integrating passives in business.
Mukesh Kalra, CEO, ET Money, Pratik Oswal, Head-Passives Fund, Motilal Oswal MF, Radhika Gupta, MD & CEO, Edelweiss MF and Shiv Gupta, Founder & CEO, Sanctum Wealth were the panellist. Umang Papneja, ED and CIO, IIFL Wealth moderated the discussion.
Here are the key highlights of the l discussion.
“It is the time to shine as an advisor. Combine asset allocation strategies with underlying passive funds,” Mukesh Kalra
A large part of passive investing is index-based. However, with innovations happening on the manufacturing side, there are possibilities of combining different strategies. How we bring these innovations to investors in an advisory model is what the future will eventually be. Given the volatility in the market, this is the time to shine as an advisor to handhold investors. Combining asset allocation strategies with underlying passive funds can help in achieving this.
“Advisors should bridge the behaviour gap,” Pratik Oswal
Behaviour gap is the difference between what you are investing and what you actually achieve. As per our internal study, this difference is about 4.7%. So, if an index has done about 13%, most investors have made 7.5-8%. The study accounts for a ten-year period and average investor count. If we remove SIP investors and pension funds, 4.7% can get a lot lower. The value that advisors bring is beyond what to buy and sell. They should bridge the behaviour gap.
“With passive products, you can do a complete asset allocation,” Radhika Gupta
Three years ago the definition of passives was limited to equity passives and that too with a limited set of market cap based products. However, that landscape has now changed. Today, there are four meaningful categories of passive funds.
Equity passive space has widened from traditional market cap based passives to also include thematic, sectoral and smart beta passives. There are also fixed income passive products which largely include target maturity funds that give investors an FD-like predictable return experience with tax benefits. Additionally, there are commodity passives which currently include gold and silver.
And finally, there is a range of international passives.
“Asset allocation is the primary driver of good investment outcome”, Shiv Gupta
The use of passives is guided by our investment philosophy. Asset allocation is the primary driver of good investment outcome. We also believe in the value of tactical asset allocation for creating good investment outcome. Additionally, there is room for value addition through manager and security selection. Based on these principles we construct portfolios.
Here’s a teaser of the panel discussion. You can watch the entire video along with other CPC 2022 videos at a nominal price of Rs. 499 only. Simply write to us at newsdesk@cafemutual.com and prepare for Passives - ‘The New Frontier’!
