Equity funds

17.11.2023

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Why in the news?

According to a recent study, during the July-September quarter (Q2), active equity funds witnessed net inflows of about Rs 74,000 crore with fund managers, while passive equity funds saw Rs 9,000 crore of inflows.

About Equity Funds:

• An equity fund is a mutual fund that invests principally in stocks.
• It can be actively or passively (index fund) managed. Equity funds are also known as stock funds.
• Stock mutual funds are principally categorised according to company size, the investment style of the holdings in the portfolio, and geography.

What are Active equity funds?

• In this fund, the fund manager is ‘Active’ in deciding whether to buy, hold, or sell the underlying securities and in-stock selection.
• This fund relies on professional fund managers who manage investments.
• Active funds adopt different strategies and styles to create and manage the portfolio.
• They are expected to generate better returns (alpha) than the benchmark index.
• The risk and return in the fund will depend upon the strategy adopted.

What are Passive equity funds?

• These funds hold a portfolio that replicates a stated index or benchmark.
• In a passive fund, the fund manager has a passive role in the stock selection.
• Buy, hold, or sell decisions are driven by the benchmark index and the fund manager/dealer merely needs to replicate the same with minimal tracking error.

                                                            Source: Indian Express