Zerodha Fund House, which is a joint venture between Zerodha and fintech platform smallcase, will launch its first NFO in the next 6-8 weeks after having got final approval from Sebi to commence operations. India’s newest asset management company (AMC) will be a passive-only fund house as it is getting tougher for active funds to beat index funds. “We will be focusing on building index funds & ETFs that provide broad-based exposures to begin with and extend to more solutions and use-cases thereafter,” says Vishal Jain, CEO, Zerodha Fund House.
Edited excerpts from an interview on ambitions, plans and competition in the mutual fund business:
Let us begin by asking you about the problem statement. There are enough well-established players in the industry selling products across various investing styles, asset classes and financial needs. Where would Zerodha fit in an over-crowded market?
We think that there is still a massive opportunity to help more Indians access capital markets with mutual funds. Even in the current scenario, we believe there is a long way to go in streamlining and improving the investor experience. Tapping into the potential of a market like India would need more providers and different approaches. Zerodha Fund House would leverage technology at all points of the customer experience to catalyze this shift and mutual fund penetration.So what kind of funds can we expect from you?
ZFH will be offering passive products that can form the building blocks for every portfolio. We will be focusing on building index funds & ETFs that provide broad-based exposures to begin with and extend to more solutions and use-cases thereafter.
Why would you be offering only passive funds and not active funds?
We think simple, transparent and affordable products have the potential to increase retail participation & adoption and passive funds exhibit these attributes. This approach also plays very well to our strengths of using technology to simplify the overall experience.
Zerodha Fund House is already being compared to Vanguard. How ambitious are you in the AMC business?
Vanguard has demonstrated to everyone how transparent & low-cost products can lead to widespread democratisation of financial products. While we are still very early in this journey, we are on the same path and are committed to helping more Indians design better financial outcomes.
Which are the first few NFOs in the pipeline? When can we expect the launch?
Our initial product set would be simple, broad-based exposures across the mutual fund and ETF formats. We are currently in the process of completing all the necessary formalities to launch our first set of products and we expect our first NFO to go live in the next 6-8 weeks.
Lastly, we can’t help but ask you about the rising competition from newer fund houses. Bajaj Finserv has just started business while BlackRock is also making a comeback in India in partnership with Jio. In passive funds, you can’t compete much on pricing. So what is going to be the differentiating factor for newer players?
As mentioned earlier, an enormous untapped market like India will require a lot more players in the industry and ecosystem. We strongly believe more fund houses and providers will only expand the market and increase investor participation. There are many levers yet to be applied that can be a differentiating factor and a strong emphasis on digital delivery of simple products will be ZFH’s strategy.
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