Mumbai: New entrants in India’s asset management industry including Reliance Industries’ financial services unit and Zerodha Broking can only disrupt distribution of mutual funds, not pricing or product offerings, according to Edelweiss Asset Management.
“Distribution is where they can make an impact,” said, Radhika Gupta, CEO and managing director of Edelweiss AM, at a Bloomberg New Voices event in Mumbai. “They could bring 50 million more users into the industry.”
Competition has been intensifying in the mutual fund space with the entry of new players, led by Jio Financial Services, the Reliance arm which announced a joint venture with BlackRock to set up an Indian asset management venture. The conglomerate owned by Asia’s richest man, Mukesh Ambani, seeks to propel Jio Financial to become one of the biggest shadow banks in the country and disrupt the financial services space.
Zerodha, which has managed to be a top player in equity broking, is also set to launch its debut funds. Baja Finserv Asset Management, NJ Mutual Fund and WhiteOak Capital Mutual Fund are some of the other new entrants in the space.
Gupta argues new competitors in an industry that now numbers some 40 firms will not be able to challenge incumbents in terms of charging less or innovating in product offerings.
“Passive funds are at razor thin margins, you can’t charge below zero because of regulations,” said Gupta, adding that Zerodha’s first offering is a large and midcap 250 stocks fund. “We were the first to launch a fund in that space.”
Edelweiss has already been competing with large bank-linked asset managers, said Gupta. Pursuing its own strategy has brought Edelweiss to the cusp of the nation’s top ten money managers, said the former McKinsey executive, who set up India’s first domestic hedge fund, and became the country’s only female head of a major asset manager. She overseas about $13 billion in assets, more than two-thirds of which is invested in debt funds.
“In a country like India we really need to focus on expanding the market,” said Gupta. “You are at a 16 per cent mutual fund-to-GDP ratio when the world average is 80 per cent. We should expand the pie and not focus on how to divide it.”