MO-AMC has emerged as one of the leaders in the passive funds space even as it maintains sharp focus on its traditional franchise of active equity management.
The fund house gets around 15-20% share of non-institutional inflows into passive funds, which has seen its AuM in this segment scale up from Rs.150 cr to over Rs.40,000 crs in the last 5 years.
A remarkable trend change over the last 12 months is that direct plans – which used to contribute 80% of inflows earlier are now down to 20%, with 80% of inflows now coming in from distributors across channels – from national to MFDs.
Passives can broadly be divided into two outcome based categories: market participation and active selection (alpha seeking).
While institutional flows tend to be more market participation oriented (Nifty/Sensex based funds), individual flows are increasingly coming into active selection (alpha seeking) strategies including sector funds, sub-sector funds, factor based funds and smart beta strategies.
Investors are increasingly engaging with their distributors on active selection (alpha seeking) passive funds and distributors are shaping client portfolios with 20-25% in passives and the rest in active funds.
MO-AMC has a bouquet of 40 passive funds at present. Plans are afoot to launch another 40 over the next 12 months.
Pratik is also keen to fix issues that have plagued ETFs at an industry level (mainly illiquidity and therefore impact cost) and is looking at the MO Group to actively offer market-making in their ETFs in a bid to give ETFs the boost they deserve.
MO-AMC recently concluded its industry-first BSE1000 Index fund – the widest market participation fund in the market today, covering 94% of market cap. Adding 500 microcap stocks to the BSE500 has historically generated 0.5%-1.0% CAGR incremental return – and this should sustain if not grow as microcaps continue to grow in salience in the overall market capitalization of Indian markets.