Passive mutual funds gain traction; AUM rises to US$ 137.51 billion in 2025
- IBEF
- October 7, 2025
Passive mutual funds are gaining significant traction in India, with assets under management rising to Rs. 12,20,000 crore (US$ 137.51 billion) in 2025, a six-fold increase from Rs. 1,91,000 crore (US$ 21.53 billion) in 2019, according to a survey by Motilal Oswal Mutual Fund. Over just two years since March 2023, the asset base has grown 1.7 times. The survey, which captured insights from over 3,000 investors and 120 distributors, including mutual fund distributors, registered investment advisers, and wealth managers, found that 76% of respondents are aware of Index Funds or Exchange-Traded Funds (ETFs). Furthermore, 68% of investors had invested in at least one passive fund in 2025, up from 61% in 2023. Despite this growth, about one-third of investors remain outside the passive space, citing higher confidence in active funds or unfamiliarity with passive products. Key factors driving adoption include low costs (54%), diversification (46%), simplicity and transparency (46%), and performance (29%).
Distributor insights reflect similar trends, with 93% understanding passive funds, 46% demonstrating deep knowledge, and 70% including them in client portfolios. Most distributors (93%) plan to increase passive allocation by at least 5% in FY26. Currently, 70% of clients hold fewer than three passive funds, indicating passive exposure plays a satellite role. Investors are primarily motivated by financial independence (61%), retirement planning (49%), and portfolio diversification (31%), with 85% holding investments for over three years. Regarding investment style, 57% prefer a combination of systematic investment plans (SIPs) and lump sums, 26% rely solely on SIPs, and 17% prefer lump sums. Investors largely source information from financial websites, newspapers, social media, and television. Chief of Passive Business at Motilal Oswal AMC, Mr. Pratik Oswal, noted that passive investing is now emerging as a disciplined, long-term approach for wealth creation.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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