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An analysis of AUM of passive funds by Cafemutual reveals individual investors account for 54% of the total AUM in index funds in December 2023. Individual investors comprising retail and HNIs have AUM of Rs.1.07 crore in passive funds.
Such a contribution was 49% last year.
Overall, passive funds constitute 3.5% of the total individual assets of at Rs 31 lakh crore in Dec 2023.
Of this, while HNIs contribute over Rs.79,000 crore of assets in passive funds, retail investors have passive AUM of Rs.28,700 crore in December 2023.
Arun Sundaresan, Head - ETF, Nippon India MF believes that people prefer index funds as they are less complicated. He said, “Structure of index funds is easy to understand and no demat account is required, so investors go for index funds. Moreover, the structure of index funds is like mutual funds which makes it more convenient for individual investors.”
Mahavir Kaswa, Head - Research of Passive Funds, Motilal Oswal MF feels that HNIs contribute a larger share in index funds within individual category as they know about the benefits of index funds. He said, “Family offices and wealth management firms have been early adopters of index funds, which played a crucial role in heightening awareness among HNIs about index funds.”
Mahavir also points out that many financial advisors had started recommending index funds to their clients. Also, with lot of new options like factor funds, many investors were getting drawn to passive funds, he added.
