The joint venture between global investment manager BlackRock and billionaire Mukesh Ambani-controlled RIL’s financial services arm Jio Financial Services (JFS) could be training their guns on disrupting the $500 billion Indian AMC business, much on the lines of what Jio did to the telecoms space.

“There is a tremendous opportunity to transform the asset management industry in a similar way to how India’s payments and telecoms sectors have evolved by introducing a full-service tech-enabled asset manager with a more affordable, better value-for-money product suite,” a BlackRock spokesperson told businessline.

Telecom, MFs domination

Jio BlackRock’s plan to ‘transform’ the asset management industry on the lines of the ‘telecoms sector’ could be a worry for incumbents. Before Jio launched in September 2016 and unleashed a price war that proved debilitating for others, the Indian telecom space was dominated by five players viz. Airtel, Vodafone, Idea, RComm, and Aircel, which together held over 75 per cent market share. Seven years hence, the telecoms market is virtually a Jio-Airtel duoply.

Now look at the current tightly-regulated ₹44 lakh crore ($500 billion) Indian mutual fund industry. While on paper it has over 40 players, the market is dominated by the top six-seven players viz. SBI, ICICI Pru, HDFC, Nippon, Kotak Mahindra, ABSL, and Axis. Together, they control two-thirds of the industry.

Also read: What does the demerger of Reliance Industries and Jio Financials mean to investors

In telecom, Jio came with aggressive pricing, offering free voice calls and the lowest data tariffs in the world. In MFs, it may be difficult to offer investment products for free given the current regulations, but charges can be lowered while delivering good returns.

“By 2030, India is expected to become the world’s 4th largest economy, have an urban population of 600 million, and account for 20 per cent of the world’s working population. We see growing financialisation and a shift from unmanaged and physical assets to saving and investing. We expect this to increase as per capita GDP rises and technology advances digital inclusion,” the BlackRock spokesperson said.

The penetration of India’s MF assets under management (AUM) to GDP ratio is significantly lower at 16 per cent in March-2022, compared to the world average of 75 per cent. This can be boosted by tapping a substantial majority of Indian households who are located in tier 2 cities and beyond, inclusion through jargon-less simplification of MF products and increasing the share in the overall savings wallet. On its part, Jio BlackRock plan to focus on a range of ‘fit-for-India’ investments to help investors in India achieve their financial goals, the spokesperson noted.

‘Power of partnership’

BlackRock in 2018 had parted ways from its 40:60 AMC venture with DSP group. Asked about how BlackRock plans to manage the JV with Greenhorn JFS, the global giant said “power of partnership” will be the bedrock of the new initiative.

“Both BlackRock and Jio Financial Services (JFS) will collaborate closely with each other as well as the board of directors and independent management team of the joint venture to build and grow Jio BlackRock,” the company said.

Jio BlackRock will have BlackRock’s deep expertise and talent in investment management, risk management, product excellence, access to technology, operations, scale, and intellectual capital around markets. “JFS contributes local market knowledge, digital infrastructure capabilities and robust execution capabilities,” the BlackRock spokesperson said.

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