Gold-silver rush pushes passive fund share in MF AUM to record in 2025

These funds now account for 17.4% of industry AUM, up from 16.6% in December 2024

Passive funds have resumed gaining ground in the mutual fund (MF) industry after a slowdown in 2024, with their share of assets under management (AUM) reaching an all-time high in 2025. The surge has been driven largely by robust inflows into gold and silver exchange-traded funds (ETFs).

 

Passive funds' share in the overall MF AUM rose to 17.4 per cent as of November 2025, up from 16.6 per cent at the end of December 2024. The sharp rise follows a rare dip in 2024, when active equity funds gained ground amid strong investor preference for higher-risk active equity schemes. Smallcap, midcap, and thematic schemes had cornered the bulk of the flows in 2024. 

Passive funds returning to the growth track in 2025 is a result of the subdued equity market and a sharp rally in gold and silver. "Steady institutional participation through equity ETFs, together with rising interest in gold ETFs as tactical hedges, has reinforced the growth in passive assets," said Nehal Meshram, senior analyst, manager research, Morningstar. 

According to Vishal Jain, chief executive officer (CEO) of Zerodha Fund House, the surge in investor interest in gold and silver ETFs can also be attributed to the change in taxation.

 

“Notably, nearly half of all new ETF folios added in the last two years have been gold and silver ETFs, driven by favourable tax changes — a reduced long-term capital gains (LTCG) holding period of one year and a capped tax rate of 12.5 per cent — which have enhanced their appeal for diversification and wealth preservation,” he said.

 

The change in taxation was announced in Budget 2024.

 

In addition to gold and silver ETFs, the passive AUM growth in 2025 can be attributed to long-term structural drivers.

 

Passive fund adoption in India in recent years has been driven by their cost efficiency, transparency, and innovative offerings, experts say. Institutional flows, especially from the Employees’ Provident Fund Organisation (EPFO), have also contributed to the AUM growth. Discussions around limited scope for fund managers to consistently outperforming benchmark indices, especially in the largecap space, have also added to the retail traction.

 

The comparatively better performance of largecap funds vis-a-vis smallcap and midcap schemes in 2025 is also a factor, considering the largecap skew of passive AUM. AUM growth depends on both net inflows and the changes in value of underlying assets.

 

"Strong equity-market performance boosted AUM in largecap index funds and ETFs while net inflows recovered meaningfully after a slower 2024. Investors continue to be drawn to passive strategies due to their low costs and transparent, benchmark-linked nature, especially as many active largecap funds have struggled to consistently outperform over longer periods," Meshram said.