Retailers Lag Passive Funds Despite Faster Pace

Passive mutual funds have experienced substantial growth, with assets under management increasing 2.3 times over the past three years. However, retail investors, despite their accelerated investment pace, still hold a minor share in these funds. This trend contrasts with their significant presence in active mutual funds, where they constitute the majority of assets in equity schemes.

The limited retail participation in passive funds is partly attributed to intermediaries. Distributors and brokers have greater financial incentives to promote active funds, which offer higher commissions. This dynamic means passive investing often grows organically as investors independently recognize its benefits over active fund selection.

While retail investor folios in passive funds are increasing, institutional investors like the Employees' Provident Fund Organisation and corporations continue to dominate the asset base. High net-worth individuals have also increased their passive fund contributions, often shifting from riskier active products as their wealth grows.