Hybrid and passive funds gained a lot of traction during the past two years owing to their advantages, vis-a-vis active equity schemes. However, they are yet to emerge as a competition to active equity funds when it comes to systematic investing.
An analysis of systematic investment plan (SIP) data shows that over 80 per cent of the net SIP inflows went to active equity schemes in September. This compares to only 6 per cent in the case of passive schemes and 8 per cent for hybrid.
Debt schemes accounted for only 2 per cent of the net SIP inflows in September.
Investment advisors recommend the SIP route for investment in volatile asset classes to maximise the benefit of rupee cost averaging. This is why equity schemes are the most preferred option for SIP investment.
Investors generally use debt and hybrid schemes to park lump sum amounts during periods of equity market downturn.
There has been a lot of noise around passive and hybrid schemes for the last couple of years, owing to multiple factors.
Hybrid schemes were pitched as a safer option to equity schemes when markets had scaled to record highs. Passive schemes are being pushed as an alternative to ‘underperforming’ active large cap funds.
The assets under management (AUM) of passive schemes had jumped 88 per cent between March 2021 and September 2022. Hybrid funds have posted a 44 per cent growth during the same period.
Gross vs net
Data from Association of Mutual Funds in India (Amfi) shows that gross SIP inflows in active equity as well as other schemes (debt, hybrid and passive) have surged this financial year.
Gross inflows in equity schemes have risen 6 per cent in FY23 so far to Rs 10,956 crore in September from Rs 10,365 crore in March. The rise in gross SIP inflows is only 3 per cent for the rest of the open-ended schemes.
However, net inflows haven’t gone up in tandem with the gross flows.
Net inflows in active equity schemes, which came in at Rs 5,672 crore in April, rose to Rs 7,360 crore in June. The figure has since declined every month to Rs 5,325 crore in September.
According to MF executives and top distributors, lower net SIP inflows are due to higher redemptions on account of the festivities.
Investors often wait for the festive season to make big-ticket purchases like a house, car or jewellery.
Amfi data shows that investors pulled out Rs 6,578 crore from their SIP accounts in September. This is the highest in 11 months. Redemptions had surged in September also as investors took out Rs 8,600 crore.