Passive funds are powering ahead, but retail investors are still in the backseat

Retail investors who dominate active mutual funds take a backseat when it comes to passive funds despite a relatively quicker investment pace, according to data from the Association of Mutual Funds of India (Amfi).

- Srushti Vaidya [e-mail]

While passive mutual funds more than doubled their assets in the last three years, retail still accounts for a small portion of these funds' assets, data showed. This, while they ramp up such investments at a faster pace than the national provident fund, high net-worth individuals (HNIs), and cash-rich corporates.

Since September 2022, assets under management (AUM) of passive mutual funds grew 2.3x to ₹12.99 trillion as of September. Of this, retail investors contributed 7.1%, up from 4.01% in September 2022, while HNI contribution grew from 11% to 17%. Meanwhile, the EPFO (Employees' Provident Fund Organisation) and corporates together contributed 73% to the total passive AUM, against 84% three years ago.

In absolute terms, retail passive assets grew 4.9x, while HNI passive assets grew 4.3x, and corporate passive assets 2.2x. To be sure, the retail ramp-up comes on a low base.