Key Points
Having joined hands with the world's largest asset manager, BlackRock, billionaire Mukesh Ambani's Jio Financial Services (JFSL) is likely to take the $540 billion Indian mutual fund industry by storm by starting with the fast growing category of low-cost passive products in true Jio style...
Unlike many other countries where the popularity of passive products have surpassed those of traditional active mutual funds, in India exchange traded funds or ETFs have 12% share in total assets under management (AUM)..
For JFSL, the easiest way to offer a mass-based product is to begin with low-cost passive funds by leveraging the wide footprint of Reliance Retail's 18,500 stores and Reliance Jio's 448.5 million strong subscriber base...
"A foray into passives seems more plausible given likely lower initial investments versus active equity funds, which need 1-3 years just to establish a performance track record, passive funds are also more amenable to digital/platform-based originations given very low (or absence of) distribution incentives," Kotak Institutional Equities analyst Abhijeet Sakhare said.. India has about 284 index funds and ETFs but retail adoption has been low, which is attributed to distribution related bottlenecks..
Bengaluru-based startup billionaire Nithin Kamath, who had disrupted India's stock broking industry with Zerodhas cheap brokerage plans just like what Jio did in the telecom business, is awaiting a final nod from Sebi for launching mutual funds...
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