The fund house has launched 14 different funds in the last nine months, starting with debt funds and then gradually expanding into retail assets.
It is now planning to set up operations in GIFT City to launch Specialised Investment Funds (SIFs) and Exchange Traded Funds (ETFs).
On the sales side, the fund house started with a digital-only model and has gradually begun moving towards onboarding customers through advisors as well.
To understand its plans and strategy, CNBC-TV18 spoke to Siddharth Swaminathan, CEO of Jio BlackRock Mutual Fund.
Here are the edited excerpts:
So you have assets under management (AUM) of around ₹18,500 crore right now as of April. What are your targets on that front? Because the AUM scale is what matters in the mutual fund industry right now.
We are very, very happy with the overall level of AUM, like this ₹18,000 crore. We still have a very strong institutional base, which is about ₹13,000-odd crore, and then ₹5,000 crore of retail. And that too retail without distributors at the moment. So we’re very happy with the numbers so far.
Now, in terms of targets, I’ve been asked this question before. I haven’t yet set any, let’s say, even medium- or long-term targets yet, and I’ll explain why. The business that we’re building is going to be a full-scale solution provider for investments. We have only just started scratching the surface of what we want to do.
So we are here, we have 14 mutual funds, and we have a direct retail model. Over the next 3 months, we’re going to be expanding pretty significantly. Some of that has already been kicked off. So we launched a model portfolio offering earlier this year, in January. That’s going very well.
So this is for people who want to come to our website or app, and rather than buying a single fund, they can actually choose to buy baskets of funds, which can fit their profiles. Now that’s already up and running.
Now we have upcoming international exposures through GIFT City. So we are very, very pleased to share that yesterday we received our final license for setting up our entity in GIFT City. And through that, we want to be offering international exposure to our investors here in India, as well as offering international investors access to Indian markets.
So that’s coming online. SIFs, which are kind of a hot topic right now, is also something that we’ve been building towards. And we now have our first proposition that is very close to being ready for launch. And that’s going to be in the hybrid category.
And again, that’s a completely new sector, new category for the market. We have an interesting proposition. And with that, we’re also going to be opening up access to that fund beyond just jobs, going through the physical channels as well for that. So that’s a big kind of new area for us to explore.
And then we have ETFs coming in, probably in the next 3 months. So with the volume of things that are coming online, you know, we still don’t set ourselves any kind of hard targets.
Our approach up until now has been a test-and-learn approach. So we launch a few things, we see how the markets are reacting to our funds, to our strategies, to our distribution style, and then we grow and evolve.
So the short answer is no immediate target. Very happy with the start. Very excited about what’s coming forward.
So, you opened up the conversation really well. You talked about the SIF topic, talked about the institutional sales. So let’s focus on the institutional sales first.
For now, almost most of your AUM comes from the fixed income category. There are very few AMCs in the country that are fixed-income heavy. Is it the positioning you would want for Jio-Blackrock?
Yeah, that’s right. A couple of things. So firstly, as I said, the goal always is and was and has been to be a full-service solution provider. So that caters to the entire spectrum of the investment population, whether it be retail or institutional.
Now, as BlackRock, we have very, very strong DNA in the institutional space in terms of managing institutional assets. So we felt as a first kind of foray to the market, starting with that would kind of play to our strengths and then also give us a really good judge of how the initial responses are. And that was, as you pointed out, very, very strong, very, very positive.
When we started, we had about 90 institutions that came on board and invested with us during the NFO. That number has now grown to over 450. So in those 10 months, the corporate treasuries, which are primarily investors that come into these kinds of products that we have, have multiplied by 5X. So really happy with how that’s evolving.
We will always be focused on making sure that, as the needs of the institutional market evolve, all our products evolve as well. So, for example, we started with just the three categories. We had overnight, liquid, and money market. Then we launched some duration products, and we now have an arbitrage fund.
So now we have a lot more that institutional treasuries can choose from. And that’s ongoing. So we continue to see institutional as a key part of our offering.
However, India is very clear about, and we are here partnering with Jio, who is probably the expert when it comes to understanding the retail segment in India. So while retail was second in terms of our sequencing of launches, that is a huge, huge area of focus where we will continue to push forward.
You have both inward and outward flow money through GIFT City. And if I’m not mistaken, is it going to be a key driver of the fund house going forward, the GIFT City project?
So again, as I said, we are launching many, many things. We don’t see any one of these as the driver. We believe all of these are equally important because they cater to different segments.
India is a broad market. Within retail, there are many, many flavours of retail here. For some retail investors, just getting access to investments is a big deal. They might just be sitting in cash or gold or fixed deposits. So just being able to participate in the mutual fund industry is a step.
Then we have people who have already invested, and then they’re looking for differentiated kinds of exposures within mutual funds. Then you have people who have already started looking at AIFs, PMS, and now SIFs.
International exposure is another really, really important part of the asset allocation, and I’ll talk a lot about asset allocation because I believe that is the number one driver of investment returns. Funds can outperform or underperform, but ultimately, it’s the asset allocation of your portfolio that really matters.
And international exposures are an important component of that asset allocation. So we’re very happy that with the approval that we’ve now received, we’re going to be able to offer that to investors here in India.
So when is the business going to start from GIFT City?
So, like I said, we literally got the approval yesterday. We still have a few checks to complete, and operations need to be ready. The funds also have to be approved. But I would put that in the next few months in terms of the time horizon.
Globally, BlackRock is known for its passive funds. And the Indian market is bit different when it comes to the active and passive combination. So where do you think that Jio BlackRock may tilt towards in India?
Very good question. Yeah, every market is different. So if you think about the market structure itself, if you think about the US, which is BlackRock’s home base, more than 50% of investment assets are in passive, whether it’s ETFs or index funds.
In Europe, where I spent 20 years before I got this job, it’s more like 33%. India is still in the teens. So India is still in sort of the 16, 17, maybe 18% kind of range when it comes to the passive-to-active ratio.
But in terms of the trends that we have seen, we believe that India is on the same path, which means that the percentage of passive as a function of the overall market is going to increase. We’ve seen a tremendous increase in the last 5 or 6 years. I think that rate is going to continue.
So for us as an asset manager and a fund house that’s launching at this point in time, we value both equally. We think both will play an equally important role.
So our passive funds, while they are smaller than our active funds right now, the growth has actually been very impressive. So when we did the NFO, I think we were just around ₹300 crore in the NFO. That’s nearly hitting ₹1,000 crore now.
So the growth that you’ve seen just in passive since we launched has been really, really impressive. So I think that’s another very, very strong avenue for growth for the entire market and also for us.
So you said at the beginning of this conversation that there are a lot of things planned out in the next 3 months. One is SIF, if I’m not mistaken, and another is GIFT City. And what are the other things that you’re planning to come out with within the next 3 months?
So ETFs. We have ETFs also in the plan. Again, we’re working really, really hard towards getting all of those launched in this time frame because it is a lot of work.
With ETFs, we’re going to really start with a focus on commodities — gold and silver. We feel that, again, not to beat around the same drum again and again, asset allocation is important. So one of the missing offerings that we have right now from our range is commodity exposure.
So we want to make sure that we are able to offer that as well. So that’ll be the first kind of set of ETFs that we will look to launch. And then we will build upon that through time.
In mutual fund space, fund managers are assets. Are you looking to hire some marquee names who carry weight in garnering the AUM at Jio BlackRock?
So, look, I believe people are the asset. I wouldn’t focus just on fund managers. But equally important are two other things — platform and process. That’s kind of our philosophy.
We want to mix the three, and that’s what I was talking about earlier with SAE as well. So you have all of the data and insights coming in, and you have the platform that can harness all of those and convert them into actionable trades.
Then you have the people that really work well with this kind of setup, and that’s the process. So you figure out who the people are and what are the kinds of people work well with a data-driven approach, comfortable with technology.
Ultimately, the people still have to make the calls. So it is still their name, their call ultimately. But they have to be comfortable with the entire platform and process that has been put together.
And that’s the combination that is really our secret sauce. It has worked really well at BlackRock globally. This is a group that manages multiple trillions across the world and has been doing it for 40 years.
So hopefully this is a model that has worked very well, and we are very excited to bring that over to India.
We’ve talked about the investment side. Now let’s move towards the sales side, which is equally important in a fund house.
You are making a pivot from digital sales to distributor-driven networks as well now. So, was it part of the blueprint already?
Yeah, exactly. So the latter again. I wouldn’t call it a pivot because it was always part of the plan.
When we launched, and like I said before, a lot of the things that we have been doing has been a phased approach. We were really focusing on getting our first set of funds out to the market, and that’s been kind of the phase one that I talked about.
We really focused on leveraging, in that case, the digital direct ecosystem because we have a partnership with Jio, which has a huge presence in that space. The overall digital ecosystem in India is also phenomenal. I think most developed countries in the world will be jealous of the level at which finance has been digitised in India.
So we saw all of these trends, and with the JV partnership, BlackRock is bringing innovative insights from a global perspective, and Jio is providing that digital connect. So that was the right approach for us to start.
And always in the plan, and now you’re seeing the execution of that plan. As we grow and evolve and add more and more funds, like you said, we now have 14 mutual funds. We are bringing on more sophisticated strategies.
So like the SIF, international exposures are coming. Now the suite of offerings is much broader. A lot of these will require additional handholding from advisors because people might need that help to understand what a particular new strategy like a SIF does.
The ticket sizes are higher, which are ₹10 lakh tickets. That is not a ₹500 SIP to get in. So in that case, it makes a lot of sense to have that physical presence in the end that’s able to guide the investor to make that decision.
So that’s what we do now. It’s the right time.
Talking about the cost side of this, obviously, the distributor commissions will increase the cost of the funds. So, how are you going to optimise the benefit for the fund holders?
Yeah, great question. So again, yes, the short answer is that there is a price to pay for access. There is a price to pay for advice and guidance. Because there is value that’s being given.
From an access perspective, these are people who either aren’t able to or are not comfortable accessing mutual funds and investments on their phone. So for them, they need that additional support. So there is a price to pay for them.
From our perspective, we want to make sure that the overall price that people pay is still relevant to the exposure that they are getting and to the returns that they’re getting, to the alpha that they’re getting.
So we do whatever we can from our side, from the direct side, to ensure that any kind of scale that we’re able to provide through our technology platform, through our processes, we are able to deliver that with competitive pricing.
And then also, when we look at it at a fund level, we want to make sure that for each product there is the appropriate amount that is allocated to distribution because it is work that needs to be done.
Some of these products are complex. They have to be explained to people. So for that, there is a price, and we want to make sure that we are pricing it at the right point.
There was a slight dip in the March AUM. That was on the institutional side. Why was that?
Yeah, and you were right to point out that it was from the institutional side.
Like you said, we have a very big and strong institutional base relative to our overall AUM. And March is typically a pretty challenging month from a cash-flow perspective. This is when there’s a lot of balance-sheet work that needs to happen with institutions.
So you typically see that at quarter ends and more so at the financial year-end. And so, as with any other institution there, we saw the same.
Happy to say that in April, all of that rebounded and more. So actually the institutional AUM now is higher than where we were at the peak of March. We were very happy with that.
