1. Retail jumps on to ETF bandwagon

Retail jumps on to ETF bandwagon

Economic revival, stable govt lure investors with banking ETFs benefitting the most

By: | Mumbai | Updated: January 14, 2015 1:19 AM

Along with equity mutual funds, exchange traded funds (ETFs) caught the fancy of retail investors in 2014. Other ETFs which excludes Gold ETFs, witnessed net inflows of R3,735 crore in 2014, according to the data from Association of Mutual Funds in India (Amfi). The bulk of retail money came in the last quarter of 2014.

Market participants said the revival in the economy and a stable government led investors to take the equity route. “Strong ETF flows in the last few months of 2014 came as a surprise. I assume most of the money came into banking ETFs as many investors felt that it is one sector that will benefit from an improvement in the economy,” said a CEO of mid size fund house.

Currently there are around 14 schemes that focuses on the banking and financial sector which also includes five banking ETFs that closely correspond to the total returns represented by the CNX Bank Index. Data from Value Research shows Goldman Sachs Banking BeEs Fund and R*Shares Banking ETF saw huge inflows in the last few months of 2014.

Fund-inflow-ETF

During the start of 2014, assets under management (AUM) of Goldman Sachs Banking BeEs Fund was R60.91 crore which surged to R1,353 crore in December 2014. While Reliance Mutual Fund promoted, R*Shares Banking ETF, whose AUM was R6.46 crore at the start of 2014, went up to R399.6 crore in December 2014, shows data from Value Research.

ETFs are passive funds and mostly considered a ‘niche’ segment for savvy investors. But current trends show that, Indian investors have also started looking at ETFs which is seen as positive for the industry. In March 2014 other ETFs saw the highest inflows of the year because of launch of Goldman Sachs CPSE ETF . During the fund launch, its AUM was around R3,395 which has come down to R2,477.71 crore in December 2014.

“I think in India ‘passive funds’ have not been as successsful as in global markets. We need institutional and advisory money for this segment to grow. The growth which we saw in 2014 was largely due to launch of the Goldman Sachs CPSE ETF,” said Aashish Somaiyaa, CEO at Motilal Oswal Asset Management Company (AMC).

However, industry players felt that, along with ‘active’ fund management ‘passive’ funds will become more popular over time.

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