Investors get massive in passive as AMCs launch new offerings

There has been massive growth in passive mutual funds in 2024. The latest data from the Association of Mutual Funds in India (AMFI) shows a record number of investment accounts in this category. New folios in the passive fund segment, which includes index funds and exchange-traded funds (ETFs), have grown by an impressive 37% during the year. Additionally, the assets under management (AUM) have increased by 24%, reaching over Rs 11 trillion in 2024.

Passive mutual funds track a specific market index, aiming to match its performance rather than outperform it. These funds require less management and typically involve lower fees.

The growing popularity of passive funds has encouraged mutual fund houses to launch 122 new schemes in 2024 alone. Nippon India Mutual Fund stands out as a dominant player in this space, with Rs 1.65 lakh crore in AUM across 1.46 crore folios in passive funds. The fund house accounts for a significant 55% of the trading volume in ETFs.

Other fund houses like Kotak Mutual Fund, Axis Mutual Fund, and Motilal Oswal Mutual Fund have also reported substantial growth in this category. Arun Sunderasan, Head of ETF, Nippon India Mutual Fund explains: The passive fund space offers an exciting opportunity for investors. These funds provide pure exposure to various segments of the market, making them true-to-label products. With a diverse range of unique funds available, investors can choose from different portfolios and risk-return profiles.

Passive funds have become increasingly attractive to investors due to their low-cost structure and simplicity, making them an excellent choice for both retail and seasoned investors. The rapid growth of passive mutual funds in 2024 highlights a significant shift in investor preferences toward low-cost, transparent, and easy-to-understand investment options. With increasing innovation and participation by fund houses, the passive funds segment is set to continue its upward trajectory.