Passive Funds

Capital markets regulator Sebi on Tuesday announced the launch of the Mutual Funds Lite (MF Lite) framework to simplify the compliance process for entities launching passively managed mutual fund schemes. The framework is designed to encourage new entrants, promote innovation, and foster investment diversification in the mutual fund industry. The Securities and Exchange Board of India (Sebi) said the MF Lite framework will apply to passive schemes, including index funds, exchange-traded funds (ETFs), funds of funds (FoFs), and others specified by the regulator. It intends to streamline processes and reduce barriers for entities focused solely on passive investment products, a move expected to increase market liquidity and ease entry for new players. The framework is based on recommendations made by a Sebi-constituted working group, which were later endorsed by the Mutual Funds Advisory Committee. The markets regulator amended its Mutual Funds Regulations 1996 to incorporate the MF

Among passive fund categories, sectoral funds are the top choice, according to the surveyed investors

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For other indices, the group-level exposure will be capped at 25 per cent

The financial regulator is looking to make it simpler for companies to launch low-cost index funds and similar investment products.

Retail investors tend to skew towards index funds, which have been gaining market share steadily over the past four years.

The Securities and Exchange Board of India (Sebi) will seek public comments on the proposals before finalising the rules, the sources said

The first quarter of fiscal-year 2023-24 saw 25 new fund offerings (NFO). Cumulatively they were able to garner INR 5,539 crores during their NFO period.

Capital markets regulator Sebi is engaged with the mutual fund industry to introduce 'MF Lite' regulations for passive funds, a move that will reduce the compliance burden and foster innovation. A passive fund is an investment vehicle that tracks a market index or a specific market segment. These funds include passive index funds, Exchange Traded Funds (ETFs), and Fund of Funds investing in ETFs. "Since the current MF regulatory framework was built around active fund management, Sebi is planning to introduce Mutual Fund Lite regulations for passive funds, wherein investment decisions are not discretionary, but tied to changes in the underlying benchmark index," the regulator said in its annual report for 2022-23, which was released on Monday. These new regulations are expected to significantly reduce the compliance requirements of passive funds and foster innovation in the passive fund ecosystem, it added. The regular mutual fund schemes, which raise money from the public, have to

As of May 31, 2023, there are 251 passive funds tracking 101 unique Nifty indices

Markets regulator Sebi will come out with a mutual fund light regulations for passive funds as part of efforts to reduce the compliance burden, foster growth as well as lower costs to investors, a senior official said on Friday. Passive funds is an investment vehicle that tracks a market index or a specific market segment. These funds include passive index funds, Exchange Traded Funds (ETFs), and Fund of Funds investing in ETFs. The regulator is looking to reduce compliance requirements for passive funds that are tied to changes in the underlying index and operate on a non-discretionary basis. To accommodate passive investments, such as index funds and ETFs, the regulator is introducing mutual fund light regulations, Sebi Whole Time Member Ananta Barua said. "These regulations will provide greater flexibility for index funds and ETFs, enabling them to offer transparency, diversification, and lower costs to investors. "By easing the compliance burden, Sebi aims to foster the growth

High networth individuals (HNIs) are increasingly lapping up passive funds, with their exchange-traded fund asset base registering a 66 per cent growth to Rs 34,000 crore in 2022-23, according to a report on Tuesday. HNIs are informed investors, and hence, use platforms that allow direct investing in passive funds. Moreover, passive investments are comparatively more attractive than active investments owing to their ease of investing, better liquidity, and lower cost. According to a report by Motilal Oswal Financial Services, HNIs' ETF AUM rose to Rs 34,000 crore in FY23 from Rs 20,400 crore in FY22, indicating a surge of 66 per cent. It was at Rs 13,700 crore in 2020-21 and Rs 7,500 crore in 2019-20. Further, HNIs ETF AUM has witnessed a compound annual growth rate (CAGR) of 70 per cent over FY19-FY23. This has resulted in the share of passive AUM (ETFs and Index funds) in the overall asset under management (AUM) increasing to 16.5 per cent in March 2023 from 6 per cent in June ...

Lower compliance will help expand the reach of passive funds

The mutual fund industry is expanding distribution reach, simplifying products and leveraging technology in a bid to more than double assets under management

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Becomes first fund house to shift from active to passive in ELSS

Index fund growth led by debt schemes, with fund houses launching target maturity funds this year

Debt schemes account for 2% of the net inflows, passive schemes 8%