Passive funds set for growth boost from clearing mechanism: DSP MF

The introduction of a clearing and settlement system tailored for passive investments is expected to unlock fresh growth opportunities for exchange-traded funds and index funds in India, according to fund house executives. Anil Gehlani, Head of Passive Investments and Products at DSP Mutual Fund, highlighted the potential impact of such infrastructure improvements on the broader mutual fund industry. The passive fund segment, which tracks predetermined indices rather than relying on active stock selection, has emerged as an increasingly attractive option for both retail and institutional investors seeking lower-cost portfolio exposure. Industry projections suggest that passive vehicles could eventually account for approximately 30 per cent of the total mutual fund industry's assets under management, a significant increase from current levels. The expansion would reflect a global trend where passive investing has gained considerable market share due to competitive fee structures and transparent, rules-based investment approaches. Streamlined clearing and settlement mechanisms are expected to reduce operational friction and costs associated with passive fund transactions, making these products more accessible to a broader investor base across India's growing retail investment segment.