 "The Securities and Exchange Board of India (Sebi) may clear the decks for the launch of a new asset class—aimed at bridging the gap between mutual funds (MFs) and portfolio management services (PMS)—along with the MF Lite framework for passive fund h")
Passive fund adoption is growing at a rapid pace, with 80 per cent of investors increasing their allocation towards index funds and exchange-traded funds (ETFs) in the last one year, according to a survey by Motilal Oswal Asset Management Company (AMC). The survey also showed that 40 per cent of investors allocate 10-30 per cent of their portfolios to passive funds.
Among the two broad passive categories (index funds and ETFs), index funds lead in popularity, with 74 per cent of the 3,300 respondents having exposure to schemes in this space. Only 31 per cent had invested in ETFs.
"Passive funds as an investment avenue have grown 1.5 times in the last one year, cementing awareness among mutual fund investors. Interestingly, index funds have been a popular choice among Millennials and Gen Zs compared to Gen X and Boomers," said Pratik Oswal, chief of passive business, Motilal Oswal AMC.
Among passive fund categories, sectoral funds are the top choice, according to the surveyed investors.
The survey found that investment decisions were driven by social media and self-research.
Highlighting other behavioural aspects, the report said, "Passive fund investors typically review their portfolios quarterly, a more relaxed approach than active investors who prefer monthly reviews. Eighty-two per cent of investors have a long-term investment horizon for passive funds, planning to hold for more than three years."
 "Mutual funds (MFs) are gearing up with offerings centered on the ‘quality' theme, as this investment approach is expected to rebound following three years of underperformance compared to the ‘value' theme.")
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