In May 2022, SEBI allowed mutual funds to launch both an actively managed open-ended ELSS fund or a passively managed open-ended ELSS fund. In an modification issued on Jan tenth 2023, SEBI has now allowed these fund houses with an present active ELSS fund to launch passive ELSS funds.However, the prevailing active ELSS funds should first be closed for subscriptions. Existing models shall be managed as common, however we can’t purchase extra. If closed three years from the closure date, the active ELSS fund shall be merged with the passive fund after giving discover to traders.What is most attention-grabbing is the phrase within the round that this resolution is “primarily based on suggestions acquired from stakeholders”.Why would a fund home cease inflows into an active ELSS fund the place they will earn way more and launch a passive ELSS fund? Similarly, why would a distributor advocate a passive ELSS fund over an active ELSS fund once they earn extra within the active possibility?I believe is secure to imagine that fund houses with present active ELSS funds wished the choice to additionally launch such passive funds, however SEBI didn’t settle for.According to AMFI, 20% of index fund common property underneath administration (AAUM) for the quarter of October – December 2022 is in common plan passive funds! That remains to be a big quantity since one of many USPs of a passive fund is its low TER!Even although the AUM of passive funds has elevated by 3868% within the final ten years!Only about 35% of AAUM is in direct plans (similar period and supply as above).Perhaps fund houses with largely unpopular active ELSS funds can do this stunt to get some AUM fillip. I don’t anticipate “huge” AMCs with ELSS funds to close transactions and open a passive possibility. But then once more, I could possibly be incorrect. 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