AUM of index mutual funds has almost tripled. | Jobs Vox

In the year With 2022 coming to an end, the mutual fund sector has attracted the interest of many investors. Although inflows across all categories of fund schemes have increased, some have shown a higher jump than others over the past 11 months.

This sample. Index fund assets under management (AUM) have increased significantly from ₹45,429 crore to ₹1,23,711 crore by 2022.

Overall, equity mutual fund AUM grew by 17% from Rs 13.33 lakh crore as on December 31, 2021. ₹15,58,003 crores on November 30, 2022.

Retail participation is seen as a major factor contributing to the growing popularity of index funds. Retail AUMs (Equity + Hybrid + Solution-Based Plans) standstill in November 2022 ₹20,91,586 crore and average AUM stood ₹20,78,259 crores.

At the same time, the monthly SIP contribution is stopped ₹13,306.49 for November 2022 as per the data released AMFI (Association of Mutual Funds in India).

“The last two years have seen a dramatic increase in the number of new investors, many of whom are investing in index funds because of their simplicity and low cost. What we are currently seeing is a big trend for the retail investor. Bringing new investments into the equity markets in a systematic way with a long-term objective. It continues,” said Abhishek Dev, Co-Founder and CEO, Epsilon Men Mart.

Growing popularity

Investment advisors attribute this trend to increasing awareness among retail investors to invest in mutual funds, particularly through strategic investment plans (SIPs) in the financial markets. Also, low cost of fund management and relatively better performance seen by these funds – are some of the reasons for this.

Deepesh Raghaw, SEBI-registered investment advisor and founder of PersonalFinancePlan says, “There is increasing awareness, and investors are aware of the benefits of index funds and the limitations of mutual funds.

As for the future, he believes that the trend will continue in other markets.

“Low cost index funds are becoming popular and there is no reason why India should be different,” he says.

About this trend (flow of funds in passive funds), Sridharan Sundaram, SEBI-registered investment advisor and founder of Wealth Ladder Direct, said, “Large caps may not see as many jumps as index funds. They are well established mutual fund schemes. In recent times, some AMCs like Motilal Oswal and Nippon have created index funds as a separate vertical. Also, index funds have outperformed in the last one year and their returns are higher than active mutual funds, which has led to the popularity of these funds.

Passive funds are considered better because active fund managers have less potential to generate alpha than active funds and furthermore — lower costs of fund management.

Total Equity Oriented Schemes:

(Source: AMFI)

As can be seen from the chart above, assets under management (AUM) of index funds have risen. ₹45,429 crore to ₹1,23,711 crores, thus increasing by 172% in 11 months.

AUM of large cap funds increased. ₹2,21,834 crore to ₹2,50,691, an increase of 13 percent. The amount invested in small cap funds has increased ₹1,05,880 crore to ₹1,29,947 crore, an increase of 23 percent by 2022.

Generally, assets under management (AUM) of equity oriented schemes are from ₹13,33,618 crore to ₹15,58,003 crore, thus posting an increase of 16.8 percent.

However, the above-mentioned trend – although it is interesting – cannot last for a long time.

Mr. Sridraran added, “Over the long term, well-managed active mutual funds outperform index funds.