Bajaj Finserv joins growing list of companies launching mutual fund business

Non-banking finance major Bajaj Finserv launched its asset management business in India, joining a growing list of companies, which includes stock brokers to portfolio management firms, that have entered the space in recent years, buoyed by the growing retail investor interest for mutual funds.

Mutual fund investments in India have surged over the last few years, especially after the Covid-19 lockdown in 2020. Average assets under management (AUM) of the mutual fund industry surged over 62 per cent from Rs 24.70 lakh crore as of March 2020 to Rs 40.04 lakh crore as of March 2023. Over the last ten years, the average AUM of the industry has jumped four-fold.

Bajaj Finserv had received final registration from Securities and Exchange Board of India (SEBI) to launch its mutual fund under Bajaj Finserv Mutual Fund in March.

The company will initially launch seven schemes, papers for which have been filed with SEBI. These include a liquid fund, money market fund, overnight fund, arbitrage fund, large and mid-cap fund, balanced advantage fund and flexi-cap fund. It will start launching the debt funds first by the end of this month or early next month, which will then be followed up by the equity offerings. Over time, it plans to launch a comprehensive set of products across fixed-income, hybrid and equity categories.

Bajaj Finserv is already a strong player in the retail lending space through Bajaj Finance. It also has a major presence in the general and life insurance space in partnership with Allianz. The company aims to become a full-stack financial services provider and the launch of the mutual fund business helps it diversify its retail franchise and leverage the strength of the existing businesses of Bajaj Finserv across a much larger customer base.

The going though will not be easy as it is a fairly late entrant in the market. At the end of March 2023, there were 42 mutual funds operating in the country. Importantly, the industry is skewed towards the large players, with the top eight players accounting for over 70 per cent of the AUMs. Five of the top eight asset management companies are backed by banks, giving them huge distribution muscle.

Bajaj Finserv also hopes its existing distribution network and the customer reach it already has through its lending and insurance business along with leveraging data will help it get initial traction from where it can scale up further.

"There is a very large set of distributors in this country, 35,000 of them; of these, 15,000 are already empanelled with us. So, there is a lot of work that we are doing at the backend over here. When you look at what Bajaj Finserv has done through its various companies, we have leveraged data, and technology; and we have built products, services and digital interactions with customers that we believe are more intuitive than others. It is these capabilities that we will bring together when we launch our mutual fund business," said Sanjiv Bajaj, chairman and managing director of Bajaj Finserv.

Bajaj Finserv will also adopt a differentiated investment philosophy to stand out from the existing players, said Ganesh Mohan, CEO of Bajaj Finserv AMC. It will look to combine information edge, quantitative edge and behavioural edge into a framework, he said.

Bajaj Finserv is not the only firm to launch a mutual fund business this year. Zerodha, India's largest broking firm, had announced in April that it would form a joint venture with fintech platform Smallcase to launch an asset management business. Broking firms Emkay Global Financial Services and Angel One had received in-principle approvals from the market regulator to launch mutual fund business.

Samir Arora-founded Helios Capital Management and Kenneth Andrade's Old Bridge Capital Management are also among the companies that have received in-principle approval from SEBI to launch mutual funds.

In 2022, Samco Securities and White Oak Capital had launched their mutual businesses.