Notwithstanding the bearish market trend and looming economic uncertainty, mutual funds have lined up 15 new fund offers to woo investors who are sitting on fences with cash booked from equity markets.
Interestingly, of the overall new funds under offers, seven are passive funds as MFs try to attract investors’ interest in key indices after their sharp fall in the last few weeks.
This apart, the other funds on offer include five thematic and three debt funds.
In fact, NFOs have been the main source of fund collection for MFs in the last few months. The NFO collection of MFs had touched a new high of ₹44,955 crore in September quarter against ₹26,899 crore logged in June quarter. However, with the equity markets turning bearish, the NFO collection dipped last month to ₹6,078 crore against ₹14,575 crore in September.
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Passive funds aim to replicate the performance of benchmark indices, ensuring minimal tracking error while keeping expenses low. Their appeal lies in simplicity and absence of the unpredictability associated with active fund management.
Pratik Oswal, Chief of Passive Business, MOAMC said while bull markets are generally a good time to launch NFOs and IPOs, most AMCs are now actively looking to build a bouquet of passive funds as the category is now getting good awareness and flows from investors. In addition – the definition of passive is now much more broad based compared to just Nifty 50 and Sensex, he said.
Manish Kothari, Co-founder & CEO, ZFunds said as the economy grows and domestic capital markets become wider and deeper investors will get the opportunity to invest across these sectors via the passive fund management strategies and mutual funds are trying to tap into this trend via NFOs.
Investors who trust actively managed funds to underperform passive funds can consider investing in these NFOs while taking cognizance of their investment in equity funds and asset allocation before they invest in NFOs of passively managed schemes, he added.
Siddharath Arora, Director & Head of Products & Research, Equirus said launching passive NFOs after a market correction seems like a strategic move by fund houses to position these products as a way for investors to enter markets at relatively attractive valuations. Additionally, the timing aligns with a growing shift in investor behaviour, where doubts around the high costs and inconsistent performance of active funds has pushed more people toward passive options, he said.
While passive funds offer market-average returns, he said they not designed to outperform the market but to mirror it.