While the sharp rise in salary of top CEOs and fund managers of mutual funds have become a major subject of discussion, some of the passively managed exchange-traded funds (ETFs) have either beaten or inched closer to the average returns delivered by the actively managed top 115 diversified large-cap funds.

Reliance ETF Junior BeES, for instance, has delivered better returns than the comparative index and diversified funds consistently for the last 10 years. The one-year-old SBI ETF Nifty Next 50 has given 38.7 per cent return in the last one year compared to the average return of 25.77 per cent delivered by the top 115 large-cap funds as of April 28.

The low expense ratio of ETFs compared to that of the actively managed large-cap funds has helped ETFs give better returns. The average expense ratio of large-cap diversified funds is about 2.5 per cent while that of ETFs is about 0.5 per cent to 1 per cent.

Sundeep Sikka, CEO, Reliance Nippon Life Asset Management, said ETFs have managed to deliver better returns due to the discipline maintained by the fund managers in selecting the best of top index stocks and staying invested in them for long unlike large-cap fund managers who churn the portfolio swayed by daily developments.

It is time large-cap investors consider index and thematic ETFs as they have outperformed large-cap funds consistently, he added.

“With the banking sector (now in the midst) of reforms, retail investors can buy into a basket of banking stocks by investing in ETFs rather than picking up individual bank stocks,” said Sikka.

Though the concept of ETFs is popular globally, it has not caught up much in India. This is because it is not promoted by brokers as they do not get any commission on ETF sales.

The assets under management of 63 ETFs — comprising 47 equity ETFs, 32 large-cap diversified funds, and 12 gold ETFs — stood at ₹50,150 crore as of March 31.

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