HDFC AMC goes big on passive funds, files for 9 ETFs with Sebi

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NEW DELHI: HDFC Asset Management Company Ltd, India’s second biggest asset manager, has filed papers for nine exchange-traded funds (ETFs) with the Securities and Exchange Board of India (Sebi), as per information available on the markets regulator’s website.

The AMC has applied for the following ETFs: Nifty Growth Sectors 15, Nifty IT, Nifty Next 50, Nifty Private Bank, Nifty100 Low Volatility 30, Nifty100 Quality 30, Nifty200 Momentum 30, HDFC NV 20 and HDFC Nifty 100.

“The core belief is that active will outperform passives going for the next three-five years. At the same time, the financialization of assets is going to be massive in India, so there will be a need for every kind of product. Therefore, investors will also look to have some money in passives as well,” said a person with direct knowledge of the matter who declined to be identified.

The mutual fund house has started focusing on passive investing, filing for nine ETFs and two index funds in the past 15 days. The company had last applied for a scheme in any category in December 2018.

Moreover, as per the Sebi website, from the beginning of 2020 till August end, HDFC has launched just three schemes of which one was an index fund and the other an ETF.

HDFC AMC as of now offers four ETFs–gold, Nifty50, Sensex, banking–with assets under management worth Rs4,045.25 crore as of 30 September. There are index funds on offer–Nifty50 Equal Weight, Nifty50 and Sensex–with a total AUM of Rs6,995.84 crore. It recently launched a new fund offer for a developed world indexes fund of fund (FoF).

Overall, the fund house manages about Rs4 lakh crore worth of assets. 

A lot of Indians have joined the investing bandwagon since the start of the covid-19 pandemic. For those looking at simpler solutions, passive funds offer the level of simplicity and returns which can match that of an index.

An index fund works like a mutual fund, in which a fund manager creates a portfolio that replicates an index, which could be the Sensex or the Nifty. There are over 30 funds available in the market on Sensex and Nifty indices alone. However, the problem with index funds is that you can buy them only at the end of the day’s net asset value (NAV).

ETFs remove this limitation, as they can be bought at any point during the market trading hours. Moreover, ETFs have to be listed on stock exchanges.

Today, ETFs are available across asset classes – equity, debt and gold. Within equity, an investor has the option to choose from market capitalisation-based ETFs, sector-based ETFs or smart beta ETFs. Even though debt ETF is at a very nascent stage in India, investors have the option of liquid, gilt and PSU debt ETFs.

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