The Rs 74.41 lakh-crore mutual fund industry, which has seen its assets rise by three times in just five years, has witnessed entries of a host of new players last year. These include Angel One Mutual, Unifi Capital, Jio BlackRock AMC, Pantomath Capital Advisors and Capitalmind MF.
Also in the queue are Sunil Singhania’s Abakkus Asset Management and Arun Poddar’s Choice International. Both have received the approval.
Carnelian Asset Management, owned by Khemanis; Alpha Alternatives of Naresh Kothari; Ashika Credit Capital of Pawan Jain and family; Quant-trader Estee Advisors; and Oaklane Capital have also applied for the MF licence.
However, the rising number of players – 47 till date and at least 7 more to join soon – has raised questions about the strategies to be followed by players who neither have distribution heft like banks and institution-sponsored fund houses like SBI Mutual Fund, ICICI Mutual Fund, HDFC Mutual Fund, and Birla Sun Life Mutual Fund, nor the technological prowess of online platforms like Jio BlackRock, Zerodha, Groww and Angel One.
These fund houses, sandwiched between strong brick-and-mortar players and technology giants, have to rely on different sets of strategies. “Unlike bank-backed firms with large branch networks or discount brokers with flashy apps, independent fund houses will have to rely on something more personal: Trust, relationships, and word-of-mouth,” said Nikunj Saraf, CEO of Choice Wealth, which is gearing to launch a fund house.
An example of the success story through these strategies is PPFAS Mutual Fund which was launched in 2013. In May, the Flex-Cap Fund – its flagship scheme – crossed assets under management of Rs 1 lakh crore – a rare feat for a single scheme. At the other end of the spectrum is Quantum Mutual Fund that was launched in 2005. While assets are low at Rs 2,751 crore, it boasts of a loyal base of investors acquired over the years.
Among new players, some have looked at it as an extension of their existing PMS business. For example, Madhu Lunawat, CEO of newly-launched fund house by Pantomath Financial Services, said, “It is a natural progression for AIF and PMS providers to provide MF to a broader client base.”
Of course, newer strategies will be the key for most. For example, Capitalmind’s first scheme – a flexi-cap scheme with a quant-led strategy – seeks to use its proprietary framework that adapts to market momentum, adjusts when that momentum shifts, and applies multi-factor rules to mitigate risk during volatile phases. Others are also likely to bet on their ability to bring their stock-picking skills into play.
The good news is that many of the new players have a loyal investor base and fan following. A good example is HDFC Mutual Fund’s former CIO Prashant Jain who launched 3P Investment Managers and in slightly over two years, has collected Rs 19,850 crore (as of July 16).
There will, however, be pressure to deliver. Aditya Shankar, co-founder of Centricity, said: “Fund houses without strong parentage need to show stellar returns to steal the show, and they will also need to focus on a core area of strength.”
In addition, there will be a question of how to make it profitable. “The break-even depends on several factors, including people, infrastructure, marketing, etc,” said Jatinder Pal Singh, CEO of ITI MF.
With the sudden growth in new fund houses, these will be interesting times, both for the industry and investors. New players, which are non-affiliated mutual funds, will have to find a unique marketing point to stay relevant, and that most probably has to be an exceptional performance.