Mutual funds have been focusing on passive funds lately as many investors are warming up to the idea of index-based investing or passive investing. Many mutual fund analysts and advisors believe that actively-managed schemes will struggle to beat benchmark indices in the coming years as the market becomes well researched. The introduction of relevant benchmarks based on total return index also made it difficult for active funds to generate extra returns, they say.
“By easing the compliance burden, Sebi aims to foster the growth of passive investments in the Indian mutual fund industry,” Sebi whole-time member Ananta Barua said while speaking at the mutual fund summit organised by industry body Assocham in the national capital.
According to him, Sebi has revised the requirements for sponsoring a mutual fund, enabling entities with sound financial conditions, including private equity funds, to become sponsors without a mandatory profit track record.
According to mutual fund advisors, allowing more freedom to mutual funds to run passive funds will result in more innovations and bring down costs. Passive funds already have significantly lower expense ratios.
