Passive Funds Set to Double Share in India's Mutual Fund Industry
DSP's Anil Ghelani projects that exchange-traded funds (ETFs) and index funds will grow from their current 17% share to 30% of mutual fund assets within five years, reflecting a significant shift in investor behavior toward passive strategies. The prediction underscores how passive investing is increasingly becoming the core of portfolios, while active funds are expected to assume a more selective, high-alpha role.
Passive investing is experiencing accelerating growth in India's mutual fund sector, according to recent commentary from DSP leadership. The announcement indicated that ETFs and index funds currently represent 17% of mutual fund assets and are projected to reach 30% within a five-year timeframe. This shift reflects changing investor behaviour across the market, with passive strategies increasingly forming the foundation of investment portfolios.
The trend represents a broader transformation in how investors approach fund selection and portfolio construction. Passive investing vehicles, which track market indices with lower costs and greater transparency, are gaining prominence as core holdings. Simultaneously, active funds are being repositioned within portfolios to deliver concentrated value through high-alpha strategies rather than serving as primary allocation vehicles. This structural realignment mirrors global patterns where passive strategies have expanded their market share over the past decade.
For market participants, this evolution has significant implications across multiple dimensions. The continued growth of passive investing affects fund house profitability, asset management strategies, and how retail and institutional investors allocate capital. Index-tracking vehicles typically carry lower expense ratios, which pressures overall industry margins but improves investor returns. The shift also influences trading volumes on exchanges, particularly in ETF segments, and raises questions about market efficiency and the role of active managers in price discovery. As passive vehicles capture larger portions of inflows, distribution channels, product innovation, and competitive dynamics within the asset management industry will continue to adapt to accommodate investor demand for lower-cost, transparent investment solutions.
Source: Markets-Economic Times
This article is an editorial summary sourced from third-party news providers and is produced by marketkin.com for informational purposes only. It does not constitute investment advice. Disclaimer