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AMFI data reveals that the contribution of individual investors in passives AUM went up over by 4% in the last one year.
The contribution of individual investors in passives AUM accounts for 21% of the total assets in Dec 2023 as against 17% of the total passive assets in Dec 2022. Of the total passives AUM of Rs.8.50 lakh crore in Dec 2024, individual investors, which includes contributions from both retail and HNIs account for Rs.1.75 lakh crore in Dec 2023.
With growing participation of individual investors in passives, passives have become more relevant for MFDs/advisors.
In this article, we will help you integrate passives in your existing distribution business. For this, we spoke a few experts. Let’s hear it from them.
Arun Sundaresan, Head - ETF, Nippon India MF
Allocation in passive funds depends on the investor’s risk appetite and interest. I don’t believe in an ideal percentage of active and passives allocation. Active and passive funds both have their unique strategies which offer variety to the investor to choose from. For example, in passives, you have factor funds like momentum, quality and value, which can give your clients exposure to different style of investments.
Also, there are funds in equity category like pure small cap funds, debt category like target maturity, commodity funds like gold and silver, which can be invested only through passives strategy. Hence, I believe that a reasonably high asset allocation can be done in passives.
MFD Bhavesh Vora, SERNET Financial Services, Mumbai
On an average, 25% of the total client’s allocation can be routed in passives, which includes equity and commodities.
Within equity passive category, I generally go for index funds in large cap category. Commodity ETFs generally give value for money, so there gold and silver ETFs are preferred. Also, if the investor wants to invest in PSU category, they have options like CPSE ETFs.
Passives are more preferable for HNIs as they look to invest in low cost products.
MFD Nimish Ashar, Mumbai
I recommend a core portfolio in passives with allocation of about 50%. Within that 60-70% can be given to funds that are broad-based market cap indices and the rest 30- 40% can be given to smart beta funds.
Also, passive funds have many advantages like they give a market cap opinion rather than a fund manager’s opinion, they have lower cost and passives can give opportunity for MFDs to get higher wallet share.
Pratik Oswal, Head of Passive Funds, Motilal Oswal MF
I believe that passives are great option to create a core portfolio. In equity category, one can look at multicap, mid cap and small funds if the risk appetite is high and for low-risk appetite one can go for broad based large cap funds. Overall, in equity about 20-40% can be allocated to passives. In commodities, a combination of gold and silver ETFs can be included. In debt category, active fund route looks more viable for investors.
MFD Sandeep Baravkar, SRS Financial Services, Thane
We recommend index funds to all our clients. Within index funds, if the risk appetite is high, we recommend mid cap index funds and if risk appetite is low, we suggest large cap index funds. We also include some ETFs both through MF and demat routes in client portfolios.
Sharwan Goyal Fund Manager & Head – Passive, Arbitrage and Quant strategies, UTI MF
Active and passive funds complement each other and both have their unique role in long term wealth creation.
Within passives, about 50-60% can be allocated to broad based market cap funds. These funds give market beta returns and are also easy to explain to the investors. 10-20% can be allocated to thematic and sectoral funds and rest of the 10-20% can be given to smart beta funds, both of these can be used to generate alpha.
To get a deeper perspective on the passives, Cafemutual is holding Cafemutual Passives Conference 2024 (CP24) on May 10,2024 at Taj Santacruz, Mumbai.
Themed ‘Time to take an active look’, the conference will have over 20 esteemed speakers who will help you identify and understand the latest trends in passives category and how can you integrate passives in your business.
You will also get a chance to interact with industry experts including CEOs, CMOs, MFDs and RIAs from across the country.
To be a part of the Cafemutual Passives Conference 2024, click here and register for the event. Early bird registration shuts on April, 30, 2024. Hurry and book your ticket today.
