Interesting times ahead for AMC business with the entry of Jio BlackRock

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Ever since the world’s leading asset management company BlackRock decided to join hands with Asia’s richest man Mukesh Ambani to venture into the Indian mutual fund business, there has been a buzz in the market that it could disrupt the entire sector.

Jio Financial Services Limited (JFS) and BlackRock, in July, announced an agreement to form Jio BlackRock, a 50:50 joint venture that combines the respective strengths and trusted brands of BlackRock and JFS to deliver tech-enabled access to affordable, innovative investment solutions for Indian investors.

“JFS and BlackRock are targeting initial investment of $150 million each in the joint venture,” the statement said.

There will be interesting days ahead for Ambani-BlackRock combine, given that the field is different this time.

Exodus of foreigners

In fact, BlackRock had earlier followed a host of foreign AMCs such as Daiwa, Deutsche, Morgan Stanley, ING, PineBridge, Fidelity, AIG, Zurich, Nomura, Morgan Stanley, JP Morgan and, Goldman Sachs that quit India for a variety of reasons.

In 2018, BlackRock sold its entire stake in its joint venture with the DSP group. BlackRock had held a 40 per cent stake in that joint venture. “The firm’s approach to building and growing business in any market where we operate is based on harnessing the full strength of an integrated business model to deliver on behalf of our clients. After nearly a decade of partnership, it is time for The DSP Group and BlackRock to take different paths, recognising the success each firm has contributed to each other,” BlackRock had then said.

According to a statement from the JioBlackRock, the foreign partner will bring deep expertise and talent in investment management, risk management, product excellence, access to technology, operations, scale, and intellectual capital around markets. JFS will contribute local market knowledge, digital infrastructure capabilities and robust execution capabilities.

Hurdles ahead

The market poses a question — Will Mukesh succeed where his brother failed? While Reliance Nippon Mutual Fund built a reasonably successful franchise, Anil Ambani was unable to retain the AMC due to debt issues in other entities. In 2019, Reliance Capital, the owner of Reliance Mutual Fund, sold the business to Nippon Asset Management.

Jio BlackRock will not face these challenges. But it has to take on a new set of players in the AMC space now. Earlier, it was only traditional players with domain expertise of asset management business. However, this time around, they have to take on new-age companies such as Zerodha and Groww. Besides, some traditional players have also turned more aggressive.

With SEBI’s tweaking of sponsor rules recently facilitating the entry of new class of players such as private equity funds, there can be intense competition. If Jio BlackRock succeeds in developing the market with innovations, technology and new products, it would benefit all stakeholders.