Mutual funds are launching a large number of passive funds. This has helped him to expand his product range. Fund houses are marketing them as multi asset allocation solutions. They have been specially brought for those who want to invest in mutual funds without the help of investment advisors.
This month, about 8 new fund offers (NFOs) have been launched in the passive segment. Many of them are open for investment. NFO is the new scheme of an asset management company. Through this, a mutual fund company raises money from investors to invest in instruments such as shares, government bonds.
In the equity segment, two schemes are that of Aditya Birla Sunlife Mutual Fund. These include Nifty Midcap 150 Index Fund and Nifty Smallcap 50 Index Fund. At the same time, Axis Mutual Fund has launched Technology Exchange Traded Fund.
On the debt front, Edelweiss Nifty PSU Bond Plus SDL Index Fund 2026 closed this week. At the same time, the others are open. These include the GILF 2027 Index Fund of IDFC and the GILF 2028 Index Fund and the NFO of Nippon India Nifty SDSL 2026 Maturity ETF.
Kastubha Belapurkar, director-fund research at Morningstar India, says, “NFOs help investors offer a wider range of products. As their track record and conditions change, the interest of investors grows in these products. ”
In the equity segment, investors are increasingly turning to passive funds. The reason is that most active funds are not able to beat their benchmark. According to the SPIVA India report, returns of most actively managed equity funds have been below their respective benchmarks in the long term. In the 10-year period ending June 2020, 67.7 per cent of largecap funds have underperformed the benchmark.
In the last few years, investors have distanced themselves from debt funds. The quality of the bond in the portfolio is a big reason for this. IL&FS and DHFL defaulted in returning money to their bonds. At the same time, Franklin Templeton discontinued six of its schemes due to poor liquidity in the wake of Kovid-19. This worked to break the trust of the investors.
Financial planners believe that passive funds where there is transparency in the portfolio can bring investors back. Radhika Gupta, CEO of Edelweiss Mutual Fund said that passive funds offer transparency, liquidity and cheap investment in the debt segment.
Such funds with low cost of investment also increase the returns. If a high cost debt fund gives 6% return before tax and its express ratio is 1.50%, then after the expense, the yield becomes 4.5%. The reason is that the expenditure gets a 25 per cent return.
