Passive Mutual Funds Dominate, Why 24% Growth in AUM?

Last update:January 17, 2025, 17:08 IST

What is Passive Fund: Do you know what passive mutual funds are? After all, why investors like to invest in it, as its AUM has grown by 24% to Rs 11 lakh crore in 2024 itself.

The number of people investing in passive mutual funds is increasing rapidly.

New Delhi. Passive funds currently dominate the booming mutual fund industry. In the year 2024, the account number of investors of passive funds including portfolio i.e. index funds and exchange traded funds increased by 37%, while total assets under management increased by over 24% to cross Rs 11 lakh crore. is What exactly are passive funds, whose popularity is growing so rapidly and why are investors so fond of these funds?

According to data from the Association of Mutual Funds in India (Amfi), mutual fund houses launched a total of 122 new passive fund schemes in 2024. Nippon India Mutual Fund, one of the most prominent players in the fund industry, now has a portfolio of Rs 1.46 crore in passive funds. It has a total AUM of Rs 1.65 lakh crore and accounts for 55% of the trading volume of ETFs. Other fund houses like Kotak Mutual Fund, Axis and Motilal Oswal Mutual Fund have also recorded better growth in passive funds.

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Why are passive funds special?
Arun Sundaresan, head of ETFs at Nippon India Mutual Fund, says passive offers an interesting proposition. Funds provide pure exposure to different market segments, making them genuine, real-label products. There are many unique funds, offering very different portfolios and different risk-return profiles for investors to choose from. Because of this diversification, investors find it less risky to invest money here.

It is easy for investors to understand.
Nippon India Mutual Fund launched 8 new funds in passive category in the year 2024. It now has 24 ETFs and 21 index funds in the industry. Given the growing interest of investors in opting for this category, other AMCs have also launched many passive funds. Passive funds have also attracted investors because they have low cost structures and are easy to understand, making them an attractive option for both retail investors and fund managers.

What are passive funds?
Passive mutual funds track an index or segment and do not require individual stock selection. They also have lower expenses compared to active funds. These funds try to replicate the market index, while measuring their risk by tracking the benchmark index. As the stock market performs, they give returns to investors accordingly. They also carry less risk and are considered safer to invest in over the long term.