'I Will Get Trolled For Saying This...': Edelweiss Mutual Fund CEO Radhika Gupta Challenges Fund Classification Norms & Calls For A Rethink On Active Vs. Passive Funds

In the world of finance, where many move round the table for funds and investments, Radhika Gupta, CEO of Edelweiss Mutual Fund, believes it is time to rethink the way investors classify funds as investors are often caught in the debate between active and passive funds.

In her post on the social media platform X, formerly Twitter, she highlights that it is important to move beyond the traditional labels of active versus passive funds and focus on understanding the merits of each fund individually.

Gupta recently shared her views on the platform X, challenging the active versus passive funds. In her post she wrote, "I will get trolled for saying this, but we need move beyond the buckets of active vs. passive and start understanding funds for what they are individually - good or bad."

"There are brilliant active funds out there, and terrible passive ones. The reverse is also true. In passive since the category is newer and evolving, more rigour needs to be applied in looking at the index behind the fund," she added.

"Construct, methodology, valuations, weighting, market cap exposure. It isn't as simple as buying an index fund based on last 1 or 3 year returns," she added in her post.

Active Funds Aren’t Always Superior

Active funds are often praised for their potential to outperform the market, as they are managed by professionals who make investment decisions based on research and analysis.

Gupta in her post points out that not all active funds are created equal. “There are brilliant active funds out there, and terrible ones too,” she cautioned, highlighting that just because a fund is actively managed does not always guarantee success.

Passive Funds: More Than Just Low Fees

On the other side, passive funds, which typically track a market index, have gained popularity for their lower fees and simplicity.

“More rigour needs to be applied in looking at the index behind the fund,” she added.

She points out that passive funds, particularly in India, are still a relatively new and evolving category. As a result, more attention needs to be paid to how these funds are structured and how well they align with investors' long-term goals.

Simply looking at past returns, such as 1-year or 3-year performance, might not be enough to make an informed choice.

Netizens Reaction

An X user responding to Gupta's post wrote, "I see no reason for anyone to troll you on this. Only an ignorant idiot will do that."

Another user added, "I prefer Active Mutual Funds in the Mid and Small Cap space and Passivr Mutual Funds in the Large Cap space."