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As the CEO, what are your three key priorities for the fund house?
At present, we have about 4 crore MF investors in a population of 140 crore people, which indicates low penetration of mutual funds. Keeping this in mind, our key priority is to increase the investor base by simplifying investing experience through easy-to-understand products.
Hence, we started our journey with simple to understand passive funds and focus on catering to retail investors through direct plans.
In fact, our shareholders – smallcase and Zerodha have democratized investing experience for retail investors through easy-to-understand and low cost offerings. We aim to replicate this in our fund house.
You are a passive only fund house, what’s the rationale behind this? Why do you think active funds do not make any sense for investors?
It’s not true that active funds don’t work. However, if the MF industry wants to reach out to 10 crore investors, it will be very difficult for active fund managers to explain their philosophy to such a large population.
Passive funds, on the other hand, are simple and people can understand them easily. You need to simply tell people that they can invest in top 250 companies through passives to participate in India’s growth story. No complex conversation like bottom up and top down at all!
And we are focusing only on passives as they are transparent, cost effective and fit into anyone’s portfolio at any given time.
The AUM of passive funds has grown up by 28% in the last one year. What are the three things that have helped the industry to achieve this growth?
In my view, three things have brought passives revolution in India – using total return index (TRI) index to benchmark performance of schemes, scheme categorization by SEBI and emergence of new set of investors during lockdown.
The fund house has launched two equity index funds. Why index funds and not ETFs?
We started off with two index funds as investors do not require a demat account to invest in them. It is only a matter of time that we launch both index funds and ETFs. In fact, we have come out with a liquid ETF recently.
Zerodha Fund House only offers direct plans? What’s the rationale behind this move?
Both our shareholders - Zerodha Broking and smallcase run direct investing platforms for investors. Zerodha Fund House is extension to this value proposition. We will be truly digital and direct plan platform for retail investors.
A report released by Kotak Institute Equities says the Indian fund industry will continue to be dominated by commission led regular plan models. What’s your comment?
It's possible but I am of the opinion that we require all sorts of people in the market to expand it. At the end of the day, everyone is working towards financial inclusion.It's too premature to say what will work or what will not work. So, you need everyone - distributors, RIAs, online platforms to grow the market.
You need MFDs because at some point of time, you need that foot soldier to talk to people but there will always be others who would want to invest online.
