Mumbai: One of India’s largest active fund managers, Mirae Asset Mutual Fund, has signalled a strong push towards passively managed Exchange Traded Funds (ETFs). After launching multiple ETFs over the past few years, the fund house explicitly spelt out its push for passive funds in an online press conference on Friday. The AMC launched a Nifty ETF in November 2018, a Nifty Next 50 ETF in Jan 2020, an Environmental Social Governance (ESG) ETF in October 2020 and an equity allocator Fund of Funds (FoF) in September 2020 feeding into ETFs. The AMC is planning to launch a FANG+ ETF later this month. However in an online media interaction on Friday, Swarup Mohanty, CEO, Mirae Asset Mutual Fund revealed that the AMC had spoken to large distributors to remove select funds from banking platforms. “It is not the size of the funds per se but the rate of growth in them that we are concerned about,” he told Mint in a subsequent interaction.
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The three funds where the AMC is discouraging inflows are Mirae Asset Midcap Fund, Mirae Asset Taxsaver Fund and Mirae Asset Focused Fund, on account of the rapid growth in their size. The three funds have Assets under Management (AUMs) of Rs4,224 crore, Rs6,934 crore and Rs5,472 crore.
The fund house stopped lump sums and SIPs in Mirae Asset Emerging Bluechip Fund (now classed as a large- and mid-cap fund) of more than Rs25,000 per month in October 2016. It has assets of Rs16,190 crore and has outperformed its benchmark and category average over the past 1, 3 and 5 years. The outperformance has come even in the past year, when active funds struggled to outperform. “You cannot ignore the underperformance of actively managed funds on average that the SPIVA and Morningstar reports have thrown up,” he said. The latest SPIVA Report released by S&P Dow Jones Indices covered here shows that 81% of actively managed funds underperformed indices in the large cap category. The Morningstar study released in March 2021 covered here has a similar finding. “Scope for innovation is also limited on the active side with Sebi categorization, unlike the passive side,” Mohanty added.
Referring to the three actively managed funds, Mohanty elaborated further. “We have raised liquidity concerns. Inflows are higher. Damage which higher inflows can do to a fund is unnoticed by the industry,” said Mohanty.
The AMC also emphasized that a sister concern, Mirae Asset Capital Markets, acts as a market maker for ETF, providing sufficient liquidity for ETF investors. However, Mohanty did not unequivocally take the side of ETFs when asked whether investors in active funds should shift to them. “As an asset manager we are neutral to both. We leave that decision to the distributor/adviser,” he said.