Passive investments to account for 25-30% of overall MF AUM by 2030: DSP Mutual Fund

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DSP Mutual Fund (DSP MF), a leading asset manager, is very bullish on prospects for passive investments, i.e ETFs and index funds in the country and expects it to account for 25-30 percent of total AUM of MF industry by 2030, a top official said. “We are bullish on passives. We will do differentiated products that would give investors better investment experience”, Gurjeet Singh Kalra, Business Head-Passive Funds, DSP MF said here on Thursday.

India’s mutual fund industry, which is on a roll, is expected to double to ₹100-lakh crore of AUM by 2030. In India, over the last three years, the total passive AUM has seen a robust 182 per cent growth at ₹ 9.5-lakh crore, accounting for about 15-17 per cent of overall MF industry asset size.

Of this, DSP MF currently has a passive AUM of about ₹ 10,066 crore, substantially higher than the ₹275 crore AUM in December 2020. In December 2022, passive AUM of this fund house was ₹2,614 crore.

Low-cost way

Passive investments like Index Funds (funds that track a specific market index) and Exchange-Traded Funds (ETFs – which are traded like stocks) provide a simple, low-cost way for investors to gain exposure to the markets. 

They minimise human bias, follow transparent rules and help retail investors build better portfolios aligned with their investment goals.

Globally, passive investing has seen tremendous growth with the US now having above 50 percent of total assets in passive funds.

Strategies like equal weight indices (indices where each stock is given equal weight, rather than being weighted by market capitalisation), which have worked well internationally, are also gaining traction in India, Kalra said.

DSP Mutual Fund was the first to launch an equal weight index fund in 2017 and ETF in 2021 India after researching and back testing this strategy. DSP’s equal weight index fund has grown over by ten times.

Investor education remains key to creating awareness about simple passive products that can serve as a good starting point for investing journeys, Kalra added.