Aditya Birla Sun Life AMC is expanding its index fund and ETF offerings to capture rising demand for passive investment products. While active funds remain the primary revenue driver, the company is betting on scale to improve absolute profits in the passive segment.
Detailed Coverage
Aditya Birla Sun Life Asset Management Company (ABSL AMC) is sharpening its focus on passive investing, identifying it as a long-term growth engine. By scaling up its range of exchange-traded funds (ETFs) and index funds, the company aims to move closer to a leadership position in a market that has historically been dominated by active management.
Scaling Passive Assets and Talent
During the Q1 FY27 earnings update, the company confirmed that passive strategies are now a core part of its business model. To support this, the AMC has brought in new leadership, appointing Hemen Bhatia to head the passive business. This move is part of a broader effort to compete in a segment where low costs and operational scale are critical for success.
Recent performance metrics indicate that this focus is beginning to show results. In FY27, the company’s ETF average assets under management grew by 47% year-on-year, outperforming the broader industry growth of 29%. With a total passive portfolio now serving approximately 17.4 lakh investors, the company is looking to build on this momentum through product diversification across equity, debt, and commodity segments.
Managing Profitability and Margins
Investors should note that passive products typically carry lower expense ratios compared to actively managed funds. However, the management stated that as the total assets under management scale, these products can contribute meaningfully to the company's absolute profit figures. This strategy is also being applied to their international business via GIFT City, where the objective is to attract larger volumes to make up for thinner margins.
While the company is pushing hard into passive products, active mutual funds remain the primary engine for the Indian mutual fund industry. The leadership has clarified that they continue to view active management as the key driver of overall sector growth, suggesting that their pivot is a strategic addition rather than a full replacement of their current business model.
Distribution and Retail Reach
Beyond product changes, the AMC is working to improve the visibility of its schemes. The company has secured approvals from major financial institutions, including HDFC Bank, HSBC, Standard Chartered, ASK Wealth, and IndusInd Bank. These partnerships are intended to strengthen their distribution network, which currently supports 1.11 crore investor folios and 40 lakh systematic investment plan (SIP) accounts. As of recent data, monthly SIP inflows stood at Rs 1,083 crore.
The key monitorable for investors going forward will be the company’s ability to maintain its margin profile while competing in the price-sensitive passive fund market. Tracking the growth of its GIFT City operations and the continued scaling of gold and silver ETF products will also be important to understand if the company can successfully offset lower fee structures with higher volumes.