India’s mutual fund industry has seen rapid traction in the last few years, driven by a growing interest of retail investors. This, in turn, has attracted several new players to the market.
Jio BlackRock Mutual Fund, among the new entrants in the space, is betting on artificial intelligence, data analytics and low costs as it looks to gain scale in the rapidly growing space.
The fund house, which is a joint venture between Mukesh Ambani’s Jio Financial Services and the world’s largest asset manager, BlackRock, launched its first actively managed equity fund on Tuesday. Jio BlackRock Flexi Cap Fund is powered by BlackRock’s systematic active equities (SAE) approach.
The SAE approach uses data and advanced analytics, which, along with experienced fund managers, aim for differentiated investment outcomes.
BlackRock’s SAE has been around for 40 years and currently has $317 billion in assets under management. The asset manager already has data on 1,000 Indian stocks. The model uses AI and machine learning in a big way to analyse traditional data sets (like earnings, sales updates, etc.) as well as alternative data (such as social media conversations) to convert them into investible insights.
The aim here will be to limit the downside when the market is falling. Protecting the underperformance over a long period should lead to better returns, pointed out Rishi Kohli, the chief investment officer of Jio BlackRock Asset Management.
The use of tech, as well as its approach to focus on digital channels and direct plans (not selling through distributors for now), is also helping the asset manager keep the costs low. The flexi cap fund, for instance, will have an expense ratio of just 0.50 per cent, which is lower than similar other actively managed funds, where the expense ratio typically ranges between 0.6 per cent and 1 per cent. Also, notably, Jio BlackRock’s flexi cap fund will not carry any exit load.
“The mission is really simple to provide accessible, affordable and personalised investment solutions to the people of India through simple digital tools,” said Sid Swaminathan, the MD and CEO of Jio BlackRock Mutual Fund.
Jio BlackRock’s first active fund launch follows its earlier launch of five index funds in August. In July, the company raised Rs 17,800 crore through three debt fund schemes.
The fund house will launch several schemes following the SAE approach in the coming months and will also have exchange-traded funds (ETFs).
Jio BlackRock will also start its broking and wealth management business in the coming months.
It also plans to enter the specialised investment fund (SIF) space in due course, though no specific timeline has been set for that.
India’s mutual fund space has seen strong growth in the last few years. Driven by a huge retail push, assets under management have topped Rs 75 lakh crore.
Swaminathan sees a huge scope for this market to grow.
“We strongly believe that right now we are just scratching the surface of asset management in India. If you look at it in terms of percentage of GDP, we are just about getting 20 per cent for the mutual fund industry. We have the UK at 80 per cent… So there’s a huge runway and we could see this market growing 2 to 3 times in the next 5 to 7 years,” said Swaminathan.