Fintechs make a beeline for mutual fund licenses

Emkay Global Financial Services and Abira Securities filed for mutual fund licenses this week. Similarly many new-age fintechs have applied for the mutual fund license and are awaiting the approval. Angel One, PhonePe, Helios Capital, Alchemy Capital Management, Capitalmind, Old Bridge Capital Management, Unifi Capital and Wizemarket Analytics are waiting for Sebi’s go-ahead to launch mutual funds. Last year, SEBI had given in-principle approval to

, Zerodha Broking and Frontline Capital Services.

There are already 43 mutual fund houses in the country. And all these new mutual fund players, if they get their license, are joining the queue to make you rich. Are you ready?

This line for mutual fund licenses became longer after the Securities and Exchange Board of India or Sebi, in December, 2020, eased the criteria for the new players to enter the asset management business in India. The sponsors that did not fulfill the profitability criteria are also eligible to sponsor a mutual fund—subject to having a net-worth of not less than Rs 100 crore. This move allowed ‘new-age’ fintech companies and even private equity players to start a mutual fund.

Market analysts and the new age fund houses believe in the principle of ‘more the merrier’. These new fund houses say that there is space for everyone in this nascent and fast-growing segment. “Today, we just have about 3.5 crore unique mutual fund investors in India. More players entering the industry is good because they can help in expanding the investor base, which is the need of the hour. As for the type of products, every AMC has its own distinct approach and given that the market is tiny and has ample room to grow, there are opportunities for everyone,” said a spokesperson from Zerodha AMC.

Among the fintechs, the one that has already entered the mutual fund business with new schemes is NJ AMC. The mutual fund distribution firm had filed for license in March, 2019 and got an in-principle approval in January, 2020. Before this, SEBI had given in-principle approval to Samco Securities and Muthoot Finance. While Samco Securities has started its mutual fund business,

tried to acquire

Mutual Fund which was turned down by Sebi.

At present, the mutual fund industry has 43 players which manage assets of Rs 37.75 lakh crore. However, most of the AUM is concentrated in the top 10 mutual fund houses.

Mutual Fund,

Mutual Fund and

Mutual Fund manage an AUM of Rs 4.5-6.0 lakh crore. However, the new AMCs are confident that they will make a place because of the under penetration of mutual funds and new innovations.

“Equity AUM to market cap in India is at around 6% compared to the world average of 33%, there is a lot of scope for new players like us who have gained traction on the back of differentiated strategies that are being offered to the investors. New players like us will play a major role in expanding the industry through innovations. As a fund house we have built an investment process which is called Hexashield Framework wherein we filter out 67,000 actively listed companies globally on six important facets. Our aim is to deliver high risk adjusted returns to the investors by building a portfolio of stocks which is widely different from the Index, which gets captured through the ratio of “Active Share” which we are pioneering in the industry and disclosing daily on our website,” said Umeshkumar Mehta, CEO Samco Asset Management.

Another new entrant in the industry- NJ Mutual Fund, is a totally rule-based mutual fund house. NJ Wealth is among the biggest mutual fund distributors in India and they entered the mutual fund business last year in October with their first scheme – NJ Balanced Advantage Fund, which received more than Rs 5,200 crore of inflows in NFO period. This is the highest collection for a maiden scheme launched by any fund house.

“While it’s true that there is concentration of assets with the top 5 AMCs, the composition of the top 5 itself is dynamic and changes with time. Also, with the MF industry reaching just over 2.5% of the population, there is a long way to go in terms of growth and change. So even though we have mature participants, the industry is still at a nascent stage of its existence. There are unexplored opportunities like the Factor Based Investing space which we intend to occupy,” said Rajiv Shastri, Director and CEO at NJ AMC.

Investment experts say investors should not rush to sign up, influenced by all the big hoopla surrounding the new launches by these newbies. Wait and watch would be a better strategy. Wait for them to build a record before parting with your money.

(Catch all the latest news about mutual funds, MF insights & analysis, best buys and investment trends on ETMutualFunds.com)

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Roy Walsh

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