Passive funds to command 25-30% AUM market share by 2030: DSP Mutual Fund

Passive investing has seen tremendous growth globally, with the US now having above 50% of total assets in them. In India too, the passive AUM (assets under management), which is the total value of assets managed by a fund or investment company, has witnessed substantial growth of 182% over the last 3 years to Rs 9.5 lakh crore. As the Indian MF industry prepares to approximately double its size to Rs 100 lakh crore by 2030, DSP expects passive Investments i.e. ETFs and index funds to be one of the big drivers for increased penetration, which could account for 25-30% of the total AUM of the mutual fund industry.

Globally, strategies like equal weight indices (indices where each stock is given equal weight, rather than being weighted by market capitalization), which have worked well internationally, are also gaining traction in India.

DSP Mutual Fund was the first to launch an equal weight index fund in 2017 and an ETF in 2021 India after researching and back testing this strategy. DSP’s Equal weight index fund has grown over ten times.

Innovative strategies on the equity side, similarly even on the fixed income side, DSP Mutual Fund was the early mover. It was the second fund house to launch a liquid ETF back in 2018, offering a solution to investors that have idle cash in between equity shares trades on the capital markets.

Invest and Earn on ET Money – Get up to 9.5% p.a. returns

At present, DSP is the only fund house to have two such liquid ETFs — one with a regular payout attracting dividend income tax on your earnings (symbol “LIQUIDETF”) and the other with a growth-based NAV attracting capital gains tax on your earnings (symbol “LIQUIDADD”).

While passive funds aim to match the market’s returns, there are also “smart beta” strategies. These follow specific rules to try to reduce risk or increase returns and provide tailored exposure to certain groups of stocks.

These can help diversify a portfolio and focus on stocks with certain characteristics, like quality or low volatility. However, smart beta funds can sometimes underperform, especially during major market shifts.

Within this smart beta category, DSP Mutual Fund has focused on quality and launched index funds in the midcap as well as smallcap segment by considering quality filters to eliminate certain stocks and selecting an index with only 50 good quality companies from the broader universe.

Investor education remains key to creating awareness about simple passive products that can serve as a good starting point for investing journeys.

Passive investments like Index funds (funds that track a specific market index) and Exchange-Traded Funds (ETFs – which are traded like stocks) provide a simple, low-cost way for investors to gain exposure to the markets. They minimize human bias, follow transparent rules, and help retail investors build better portfolios aligned with their investment goals.