Bounce in passive fund inflows in 2024 on new launches, EPFO increase | Mutual Fund – Prime Tales

Inflows into passive funds, which slumped after the change in debt fund taxation in April 2023, have rebounded this calendar yr (CY2024). The surge in inflows got here on the again of a rise in new index fund and change traded fund (ETF) launches and robust efficiency in a number of the classes.

The mixture inflows into passive funds topped Rs 12,000 crore within the earlier two months (March and April 2024), with the full CY2024 web inflows at Rs 37,200 crore. The common month-to-month inflows within the earlier six months had been simply Rs 3,263 crore.

Based on mutual fund (MF) officers, the Workers’ Provident Fund Organisation (EPFO) has additionally contributed to the bounce in ETF inflows.

In March, ETFs alone had obtained a web influx of Rs 10,560 crore. ETFs principally draw inflows from institutional traders with the EPFO being the most important investor. Again-of-the-envelop calculations utilizing belongings beneath administration (AUM) information reveals that just about Rs 9,000 crore ETF inflows went into Nifty 50 and Sensex ETFs supplied by SBI Mutual Fund (MF), UTI MF, Nippon India MF, and ICICI Prudential MF. The EPFO investments largely go into these schemes.

Mutual fund officers say the surge in index fund inflows was supported by an increase in fund launches and enticing previous performances.

“A whole lot of new funds have are available on the passive aspect in latest months. We’re seeing participation classes, be it market-cap, sector or factor-based funds. The curiosity is pushed by sturdy performances and good expertise lately,” stated Anand Varadarajan, Head – Institutional purchasers, Banking, Alternate investments and Product technique, Tata AMC.

Passive funds have been on the prime of the one-year and three-year efficiency charts for some months now. CPSE ETF has given the very best return within the one-year interval at 107 per cent. Motilal Oswal S&P BSE Enhanced Worth ETF and index fund, together with UTI Nifty 500 Worth 50 Index Fund, are additionally within the prime 10. As well as, passive funds had been main in fashionable classes like midcap and smallcap for essentially the most a part of the yr.

There was a surge in new fund choices (NFOs) within the fairness area because the bull run within the fairness markets gained momentum. The launches have been larger on the passive aspect as most massive fund homes have already got accomplished their energetic fairness and hybrid product bouquet.

The launches within the fairness, hybrid, and passive area surged to 80 within the second half of the final monetary yr (H2FY24) in comparison with 47 within the earlier six months, in accordance with information from the Affiliation of Mutual Funds in India (Amfi). As of April finish, mutual funds had launched 33 passive funds in CY 2024 vis-a-vis 15 launches within the earlier 4 months.

 

At the same time as passive fund AUM is simply a fraction of energetic AUM and remains to be seen as an institutional providing, retail traders have began to heat as much as the idea of index-based investing. The traction is essentially pushed by the 2 benefits that they’ve over energetic funds — low value and no fund supervisor danger.

First Printed: Could 20 2024 | 7:50 PM IST