Mutual fund investors betting big on ETFs in 2021

Mutual fund investors invested heavily in exchange-traded funds (ETFs) this year through October, according to AMFI data. According to the Association of Mutual Funds in India (AMFI), the “Other ETF” category saw the biggest inflow of around Rs 50,824 crore between January and October.

AMFI classifies ETFs into two main categories: gold ETFs and other ETFs. Other ETFs include all other or non-gold ETFs.

Gold ETFs saw an inflow of Rs 3,818 crore over the same period.

“There are basically two types of ETFs: gold ETFs and gold ETFs. Gold ETFs are the other ETFs according to the Amfi classification. They are consumer ETFs” , explained Dhirendra Kumar, CEO of Value Research.

Kaustubh Belapurkar, director of fund research at Morningstar, explained that Sensex and Nifty take the lion’s share of other ETF categories.

“Sensex and Nifty are the main part of other ETFs. Comparatively, newer ETFs like Bharat Bond also seem to be gaining momentum,” Belapurkar said.

But why do ETFs see large capital inflows compared to other equity systems?

Dhirendra Kumar said ETFs are attracting investors and the trend may also continue in the coming months.

“Investment in ETFs is a rising trend. More and more equity funds are struggling to beat the index. ETFs are gaining popularity. Kumar.

Actively managed equity plans struggled to beat their benchmark after the introduction of the total return index. According to data available from Value Research, only 23% of large-cap plans managed to beat their benchmark. Mid-cap plans fared relatively better, while small-cap funds fared much better.

The other main reason for the inflow into ETFs is the fact that government entities such as the EPFO ​​also contribute significantly to the inflow into ETFs.

“Two or three years ago EPFO ​​and others were allowed to invest in mutual funds and as they are set up by the government they don’t want people lifting a finger for their pennies. -performance. So they invest in index funds,” Kumar pointed out.

Belapurkar has a similar opinion. “A lot of ETF inflow is EPFO ​​money,” Belapurkar said, but added that retail investors also buy ETFs with index funds.

Mutual fund companies have launched new funds, offering new and varied strategies to investors. According to Amfi, eight new fund offerings (NFOs) are open for subscription at this stage, which include ETFs and funds of funds (FoFs).

“There is a mix of NFOs going on. Fund companies are looking to fill gaps in domestic product mixes or launch products in relatively untapped areas like non-US developed markets, global real estate, etc. .,” Belapurkar said.

Dolores W. Simon