Stock brokerage Zerodha and Wealth management company Smallcase have announced a joint venture to launch an asset management company (AMC), which will focus on passive mutual funds.
Zerodha Broking Limited in September 2021 had received in-principle approval from the Securities and Exchange Board of India (SEBI) to set up an AMC.
While Zerodha's approval for final registration is under consideration with the capital markets regulator, the joint venture has already been approved by SEBI.
“While awaiting the final approval of our AMC (mutual fund), we asked if we should build it ourselves or collaborate. Given the 6+ years of experience that @smallcaseHQ has in building investment products, it made perfect sense to create a joint venture (JV) to build the AMC,” Nithin Kamath, Founder and Chief Executive Officer of Zerodha tweeted on April 12.
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Vasanth Kamath, Founder of Smallcase, said, “Very excited for @smallcaseHQ to partner with @zerodhaonline to help introduce a new generation of investors to mutual funds. The upcoming AMC will be a joint venture between Zerodha & smallcase and will use learnings & shared values from both cos to build an enduring fund house.”
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Zerodha has for long focused on bringing transaction costs down in its discount brokerage business. The firm had planned to launch low-cost funds. “Passive, simple, cheap index-traded funds will be on offer,” Kamath had said earlier.
According to Nithin, Smallcase will help Zerodha build simple low-cost passive mutual fund products.
“In the last six years, smallcases have been successful in helping millions of demat account holders build a healthy long-term portfolio and there's immense potential to bring the same principles of simplicity and transparency to mutual funds to bring in a new segment of investors,” said Vasanth.
Stiff competition
Mutual fund sector in India is already a competitive zone with over 40 firms fighting in the Rs 40 trillion assets under management (AUM) industry.
Nithin had earlier reiterated that he would launch only passive funds, which are characterised by low cost for investors and track an index to generate in-line returns. Kamath had said that there was no plan to launch active funds.
Apart from Zerodha, finance services major Bajaj Finserv, Samir Arora-led Helios Capital Management and Kenneth Andrade’s Old Bridge Capital Management have also received in-principle approval to launch mutual fund in India.
Further, Deepak Shenoy’s Wizemarkets Analytics, Angel One, Emkay Global Financial Services is among seven entities who’s in-principle approval is under consideration with SEBI.
Notably, Late Rakesh Jhunjhunwala co-founded Alchemy Capital Management is also in the running for a mutual fund license.
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