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Silent rise: ETF's AUM grows in highly volatile trade era

Sep 16, 2020 (MENAFN via COMTEX) --

(MENAFN - IANS) Mumbai, Sep 16 (IANS) Despite economic contraction along with uncertainty unleashed on account of the pandemic, a silent build up of funds has taken place across the Exchange Traded Fund (ETF) category.

In financial parlance, the ETF combines the trading flexibility of a stock w ith the diversification and low costs of a mutual fund.

It give investors an exposure to a basket of stocks at a fraction of the amount and it is relatively safer to invest.

Accordingly, this segment has received a phenomenal response in the last 5 years, especially in the last six months of high volatility.

At present, the total category assets under management (AUM) grew at an astronomical pace.

Recently, released AMFI numbers indicate about 50 per cent growth in the overall ETF category.

In the sub-category, Gold ETFs have seen the highest traction due to the rising price, attractive returns leading to AUM growth of 146 per cent YoY.

In the last five years, the overall category's total AUM (debt and equity) has grown by over 26 times from just Rs 7,000 crore to over Rs 2 lakh crore.

While initial investment commitment to the ETF category came from EPFO, the launch of CPSE and Bharat 22 ETFs gave a further fillip to the category, said industry insiders.

"The large-cap category ETFs have played an important role in the overall growth of investments. It has had the highest inflow in the segment," Prashant Joshi, Co-founder and Partner at Fintrust Advisors.

"However, with the increase in market knowledge and depth in the coverage of the listed companies, the information arbitrage will come down, which will impact the alpha generation opportunity in mid-cap and small-cap as well, just like other developed markets like the US and Europe, driving further ETF investment in these segments."

According to Lakshmi Iyer, Chief Investment Officer (Debt) and Head Products, Kotak Mahindra Asset Management Company: "We have seen participation grow in ETF ownership and expect this trend to continue."

"One could have ETF strategies co exist with active diversified portfolios."




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