Of all equity funds, large-caps are the most conservative, as they invest in well-established large businesses, which are more resilient to business, economic cycles and market volatility. Since they carry relatively lower risk, mutual funds that invest in large-caps are the most popular in the equity fund category. Before we proceed, we'd like to highlight the difference in the way we view the large-cap category space. While SEBI categorises the top 100 companies by market-cap as large-caps, we at Value Research have clubbed actively-managed funds, passively-managed funds and focused funds that invest predominantly in large-cap stocks to be part of a wider large-cap universe. As of October 2022, the total assets managed by 148 of these funds were close to Rs 6.4 lakh crore. The inflow trends Since the beginning of 2021, there has been an increased inflow in the large-cap category. However, with equity markets remaining volatile for the most part of 2022, a majority of the investment has been contributed by ETFs. In addition, most of the money has been invested in the top numbers in the top funds. Case in point: the top three actively-managed and index funds accounted for about half of their respective total net inflows. The concentration of inflows in ETFs was even higher, where the inflows of the top three funds made up about three-quarters of the total investment. This was primarily driven by EPFO's notional investments of Rs 2.26 lakh crore in ETFs, as on March 31, 2022, constituting about 41 per cent of the large-cap category's total AUM at the time. The active-passive conundrum The case for passive funds started gaining momentum in 2018, especially when only two of 32 actively-managed large-cap funds were
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