INSUBCONTINENT EXCLUSIVE:
Institutional investors have shown high preference for Exchange Traded Funds (ETFs) and Fund of Funds (FoF) over other category of mutual
fund schemes in the past three-four years
Of the total investments in ETFs and FoFs, at the end of August 2019, close to 93 per cent has come from institutional investors and a
meagre 7 per cent from individual investors
Institutional investors include banks, insurance companies, Employees’ Provident Fund Organisation (EPFO) and other domestic institutions
Individual investors include retail investors and high networth Individuals (HNIs).
There are a few reasons for the rising interest of
institutional investors in ETFs
First, a large part of the ETF investment is from EPFO
Two-and-a-half years ago, the government had increased the EPFO’s investment limit in ETFs to 15 per cent from 10 per cent
These ETFs also include SBI, UTI and LIC.
Mutual fund distributors point out that the quantum of investments EPFO can make are in the range
of Rs 12,000-15,000 crore, which is quite huge and shows the influential role the provident fund body plays
Besides, the very structure of ETFs work in institutional investors’ favour, which are more long-term than MFs.
Further, ETFs incur lower
Also, at times when it is difficult to identify alpha or returns higher than the benchmark in active funds due to slowdown, investment in
ETFs becomes a prudent choice.
