JioBlackRock: What can MF investors expect?

 

Parentage alone may not be enough for the joint venture to conquer the Indian mutual fund industry Sid Swaminathan, JioBlackRock AMC’s MD and CEO, at the company’s office in Worli, Mumbai.  When India’s largest company announced a big-bang joint venture (JV) with the world’s biggest asset manager to enter the country’s fast-growing mutual fund industry, it marked the coming together of two titans, and ratcheted up speculation to fever pitch. After all, this was in a sense the corporate equivalent of Sachin Tendulkar teaming up with Lionel Messi.

 

The Mukesh Ambani-led Reliance Industries Ltd (RIL) is not known to play second fiddle in any industry it sets its sights on. And BlackRock, with assets under management of a staggering $11 trillion, is referred to as the third most important economic entity on the planet, behind only the US and China.

 

This is BlackRock’s second innings in the Indian mutual fund arena, after its 10-year JV with DSP ended abruptly in 2018, reportedly after both partners sought full ownership of the business.

 

After receiving all the requisite regulatory approvals by June, JioBlackRock Asset Management Company (AMC), the 50:50 JV between RIL subsidiary Jio Financial Services and BlackRock, commenced operations by launching three cash funds, followed by five index funds in August. The new fund offer (NFO) for its maiden actively managed equity product, a flexicap fund, closed earlier this month.

 

Many industry watchers saw this as an uncharacteristically subdued start for a company with this pedigree. Initial impressions, however, have a tendency to be deceptive.

Swaminathan smiled when asked about market expectations of the AMC making a high-voltage debut along the lines of Jio, which disrupted the telecom market in 2016 by launching zero tariff plans. His response was cautious: “The two are not comparable. These are two very different industries in terms of competition, regulations and customers.”

 

JioBlackRock, he said, had a clear cut approach: “First, growing the overall industry. Then bringing in differentiated products, differentiated value propositions and differentiated ways of getting people to access these products.” Rather than one major disruption, Swaminathan said, “I would call it a series of micro disruptions. That’s how we have approached it.”

 

Whether a single earthquake or a series of tremors, one thing is beyond doubt: it would take something momentous to make a dent in India’s mutual fund market, which currently has 54 companies managing assets worth Rs 75 trillion across around 2,000 schemes. It’s a tall task, but that’s where the American partner’s track record comes into the picture.

 

 

JioBlackRock’s flexi cap fund marks the India debut of BlackRock’s Systematic Active Equities (SAE) framework. While this may sound awfully like just another marketing buzzword, it portends something much more significant.

 

Systematic Active Equities is BlackRock’s famed quantitative investment unit, which uses advanced computer modelling techniques to construct portfolios. What sets it apart from most traditional quant models is that in addition to financial data, it analyses over 400 alternative data sources such as social media posts, internet searches, satellite imagery and even traffic patterns to squeeze out insights.

 

BlackRock acquired SAE as part of its buyout of Barclays Global Investors in 2009 (the unit actually traces its roots to an investment firm set up by Wells Fargo in 1971). SAE now employs over 200 portfolio managers and researchers, many of whom are PhDs in various subjects, including physics, mathematics, computer science and engineering.

 

The convergence of traditional and unstructured datasets has worked wonders for the SAE unit, which has assets under management of $300 billion across equities, fixed income and alternatives. An astounding 93% of SAE’s assets have outperformed their benchmarks or peer median over the past year, compared to 47% for the Fundamental Equity division, according to BlackRock’s Annual Report for 2024. Over the past three years, 89% of SAE assets have beaten the benchmark, while the figure rises to 93% for the five-year period.

 

The Fundamental Equity division picks stocks using fundamental methods, i.e. human analysts and researchers.

 

This SAE framework, being operated from BlackRock’s US headquarters and localised by the JV’s team in Mumbai, is now being applied to India’s chaotic equity market through the flexicap fund.

 

“It’s a very risk controlled fund, so it will look to protect on the downside and then look to generate consistent alpha over the long term. If we are able to do that consistently over a two- to three-year period, which is what our backtests have shown us, then it is going to give you returns in line with the best ones up there,” said Swaminathan, who has served in various leadership roles at BlackRock, including as its head of Index Equity, International, in London, where he oversaw assets worth $1.25 trillion. “And because of the way it is constructed, it looks, feels and behaves very differently to existing funds in the market.”

 

Explaining how the SAE framework can offer a competitive advantage, Swaminathan said, “Let’s say you are analyzing banks. You can obviously wait for the quarterly numbers. But you can also get faster information in some cases by looking at credit card swipes, for example. What’s the frequency of swipes, how is it trending compared to the sectoral averages and so on.”

 

That intelligence, he says, enables one to form a more immediate-term view instead of waiting for the quarterly results.

 

“And if we have a platform that is able to absorb all this data, clean that data and transform it into insights in combination with more traditional data points like valuations, profitability, PE ratio etc., then we believe there’s an opportunity to generate alpha.”

 

The other element is scale. A fund manager and his team can read and analyze a limited number of analyst reports, but a machine can read thousands of them. Thanks to artificial intelligence (AI), says Swaminathan, BlackRock is also able to generate things like tone and sentiment much more accurately from those reports.

 

“So, you are no longer limited by human brain power capacity. If a traditional set-up using fund managers and analysts can do in-depth research on say 30-40 stocks, our models can do it for hundreds,” he said.

 

So, rather than taking concentrated positions in a handful of stocks, it enables smaller active positions on a larger universe of stocks, “which not only allows you to generate alpha but do it with lower risk”.

 

Global vs local

 

Thanks to the explosion of data in recent years, combined with the emergence of powerful tools such as artificial intelligence (AI) and machine learning (ML), quant firms are engaged in an arms race with each other to extract even the tiniest additional insight. However, first-mover advantages dissipate very quickly in this cut-throat space and there’s nothing like a permanent magic wand.

 

This makes it imperative for AMCs not just to keep hunting for new sets of data but also dynamically adjust their weightages and mathematical models in response to rapidly changing market conditions. The question is whether relying on this approach will work in a comparatively opaque market like India.

 

“The good news is that there’s a lot of data being generated in every sector of the economy, so a data-driven approach can provide an edge in stock picking,” Dhirendra Kumar, founder and CEO of Value Research, told Mint. “That said, just this cannot be your unique selling proposition. In fact, there are many quant models being used by domestic mutual funds and institutions that incorporate non-traditional datasets as well,” he added. “So, BlackRock’s or anyone else’s models will have to prove themselves in the market over a sustained period.”

 

Then there is the question of adjusting for local nuances. In the US, for example, BlackRock tracks satellite imagery of car parks outside shopping centres to estimate demand, but that might not be relevant in India. Instead, the AMC uses quick commerce deliveries as one of its data signals.

 

Swaminathan declined to share details about other datasets tracked by JioBlackRock, but said there’s an entire array of data points being collated though not all are relevant from a sector or stock perspective.

 

Also making its India debut is Aladdin, BlackRock’s investment management and risk analytics platform. It stands for Asset, Liability, Debt and Derivative Investment Network.

 

Aladdin has an India risk model built exclusively for the JV, which allows JioBlackRock’s fund managers to filter stock selections and assign appropriate weightages to data signals.

 

But more than AI, ML and sophisticated quant models, Swaminathan insists SAE’s secret sauce for success is something else. “The key differentiator is that the technology, data, AI and humans are all integrated. Humans (fund managers and researchers) are involved in every aspect, from the first step of selecting the stock universe to subsequent processes of data analyses and insights,” he said.

 

The team, said Swaminathan, has the ability to look at the entire stock recommendation output of the models and filter out companies based on, say, corporate governance issues or other risk factors. “This is what separates SAE from other black box quant models,” he emphasized.

 

Last mile

 

India’s mutual fund industry has emerged as one of the fastest-growing segments of the country’s financial landscape, with assets under management (AUM) surging more than seven-fold in just over a decade on the back of rising retail participation, mainly through systematic investment plans (SIPs).

 

The industry is also very top-heavy, with 10 AMCs holding around 80% of the total AUM. With an AUM of over Rs 11.4 trillion, SBI MF, established in 1987, is the country’s biggest asset manager, followed by ICICI Prudential AMC (Rs 9.5 trillion), HDFC AMC (Rs 8.3 trillion) and Nippon India MF (Rs 6.1 trillion).

 

SBI MF reported a profit after tax (PAT) of Rs 2,531 crore in FY25, while ICICI Prudential’s PAT was at Rs 2,650 crore and HDFC AMC’s at Rs 2,460 crore.

 

On its part, JioBlackRock has racked up over Rs 13,000 crore in AUM in barely three months. While that is creditable, the asset manager will be hard put to overtake SBI MF and ICICI Prudential organically the way its telecom cousin eased past Vodafone-Idea and Airtel.

 

A conspicuous ‘micro-disruption’ has been JioBlackRock’s decision to take a digital-only approach and bypass the traditional distributor-led model used by the industry.

 

The cost savings arising out of this, as well as use of Aladdin to construct and manage portfolios, has allowed it to offer the flexicap fund at an expense ratio (annual fee a mutual fund charges to cover its operating costs) of 0.50%, compared to the 0.60%-plus charged for similar direct funds by peers such as Parag Parikh, HDFC and ICICI Prudential.

 

Swaminathan does not rule out physical distribution at some point down the line, but said the focus at the moment is to fully harness the “power of the phone”.

 

Bold and beautiful?

 

The opportunity is huge, but so are the challenges. Sonam Srivastava, founder and fund manager at Wright Research PMS, said JioBlackRock’s digital-only approach is a bold experiment in a market where over 70% of mutual fund inflows still come through distributors.

 

But it’s not entirely misplaced. India’s wealth ecosystem has changed sharply in the past five years—demat penetration has crossed 140 million, SIP accounts are rising by 20–25% annually, and over a third of new mutual fund investors are digital-first. This signals that a meaningful segment is now comfortable investing directly through platforms.

 

However, distribution remains the backbone for scale and trust in the mutual fund industry, especially outside metros, where investor education and hand-holding are crucial.

 

“JioBlackRock may find digital distribution efficient for cost control and urban adoption, but for deeper penetration and AUM scale, partnerships with RIAs (registered investment advisers), fintechs, or even traditional distributors might become inevitable,” Srivastava added. “The future of distribution in India is hybrid, where digital channels drive discovery and onboarding, while advisors and distributors retain the role of building long-term conviction.”

 

It also helps to be part of the Jio family, which houses the country’s largest telecom operator, with 506 million subscribers as of 30 September. “We are already integrated within the Jio Finance app, which has millions of people coming every month to do their finances. We also have a presence in the MyJio app, which has hundreds of millions coming in every month for telco and other needs,” said Swaminathan.

 

In addition, the AMC has partnered with digital platforms like Paytm, Groww and Zerodha to distribute products. The early results have apparently been “more than encouraging”.

 

“We have over 630,000 investors across the life of this JV—in just a little over three months. But what’s even more encouraging to me is that more than 10% of those are first-time investors,” said Swaminathan. “Our customer base already covers some 17,000 PIN codes, which is around 90% of the PIN codes in India. And we have only just begun,” he added.

 

Well begun may be half done, but the same does not always hold true for foreign asset managers in India. The list of global titans exiting the domestic mutual fund market is a long and distinguished one, and includes the likes of Morgan Stanley, JP Morgan, Deutsche Bank, and Goldman Sachs. Asked about this, Swaminathan said localised offerings and patience are crucial for success.

 

BlackRock itself is taking a second swing at the Indian market, though Swaminathan insists the dynamics are completely different this time. The current joint venture is not between two asset managers. This is between BlackRock as the asset manager and Jio Financial Services, which brings in a deep understanding of the retail consumer along with digital distribution, he insisted.

 

So, what are its near-term plans? Swaminathan said it would continue to have funds that cater to institutional investors as they are an important base for the AMC. “In retail, we want to have index as well as actively managed offerings,” he said. Exchange traded funds and specialized investment funds are in the pipeline.

 

For now, the market will be keenly tracking how JioBlackRock’s funds perform in the crowded space. As the JV’s foreign partner and its marquee peers will attest, it takes more than just a brand name to entice an Indian investor.