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A survey conducted by Motilal Oswal Mutual Fund reveals that 61% existing mutual fund investors have invested in at least one passive fund.
Of these passive fund investors, 87% of them have invested in passive funds through index funds while 41% have exposure to ETFs.
Report also says that passive funds have gained traction as its contribution to the total AUM has increased from merely 1.4% in 2015 to over 17% in 2023.
Over 2,000 MF investors participated in the survey. Talking about the survey, Navin Agarwal, MD & CEO, Motilal Oswal AMC said, “The demand for passive investing has grown exponentially over the past few years, which reflects in AUM growth of 8.5x in last 5 years at a CAGR of 54%. Our commitment to innovation and education will continue to support the future of passive funds in India.”
Here are some key highlights:
- Exponential AUM growth in passive funds: The mutual fund industry has seen a major shift towards passive funds over the last five years. The AUM increased from Rs.83,000 crore in 2018 to Rs. 7 lakh crore in March 2023
- Reasons for investments: 57% of the respondents prefer investing in passive funds due to their low-cost nature as the biggest reason, followed by 56% respondents who feel that the simplicity of these funds is what pulls them to invest in them and more than 54% investors do so for the fact that they tend to deliver market returns
- Percentage of allocation to passives: 53% of the respondents say they increased their allocation to passive funds in the last 12 months. Nearly half of those investing in passive funds allocate 10-30% of their portfolio to passive funds, reveals survey findings. About 15% respondents allocated 31-50% in passive funds, while 12% allocated more than 50% of their portfolio in passive funds. Only 28% of investors have a less than 10% allocation to passive funds
- Affinity for index funds: Majority of respondents prefer investing via index funds as investing in index funds has no requirement of demat account and it is comparatively straightforward, similar to any other mutual fund transaction.
- SIPs or lumpsum: 3 in 4 respondents prefer to invest in passives via SIPs. More than 75% of respondents said that they preferred to invest regularly every month using SIPs
- Source of information: The survey also reveals that more than 60% of respondents get information on markets and investments from social media platforms like Twitter, Instagram, etc. whereas only 26% respondents follow news media for information related to investing
