Jio AMC Entry: SBI MF Says it Knows Investors Better, Has Competitive Pricing

In the face of Jioblackrock's entry into the already competitive asset management space, market leader SBI Mutual Fund on Wednesday said it understands investor needs better and offers competitive pricing on products.

Its deputy managing director and joint chief executive DP Singh also said the entry of the entity will help expand the market, and SBI MF will also benefit from it.

"They (Jio) will like to be successful, and we wish them all the best. But at the same time...we have seen, we have the experience, we see how people behave. The kind of pulse of investors, which we have, they will take some time to be there," Singh told reporters here on the sidelines of a company event.

Pointing to the ₹18,000 crore of funds collected by the deep-pocketed promoters-backed challenger's first funds, Singh said the assets under management are "much below" that today.

When asked about the pricing Jio has adopted, a very aggressive stance offering a 0.5% total expense ratio in its flexi cap fund, which will also be the maiden actively managed fund from the house, Singh claimed that SBI MF offers similar or better pricing.

He said that if one compares the direct plan of SBI MF with that of Jio AMC, he or she will find that his company's offering is competitive.

"Whatever they are charging in direct plan today, we are charging either equal to or less than that," he said.

Singh also sounded sceptical of how successful a digital strategy in the MF space can be, but added that the industry's larger worry has to grow the pie, and from that perspective, the entry of a new player is welcome.

The MF industry's assets under management are 30% of bank deposits in India against 100% in many countries, and there are only 5 crore portfolios handled by the asset management companies compared to over 80 crore bank accounts, which illustrates the road ahead to grow.

Jioblackrock AMC launched the flexi cap offering on Monday with the aggressive pricing, and added that it aspires to have a significant play in the MF market, which it sees growing by 3 times over the next five to seven years. It is relying on digital technologies to lower costs, which helps it do so.

Meanwhile, SBI MF announced its specialised investment fund (SIF) offering, christened 'Magnum SIF', and Singh said he expects over 15,000 investors to sign up on the new product, which requires a minimum investment of ₹10 lakh.

He said retirees and other long-term investors will be the target group for the offering, where the AMC has launched a hybrid long-short fund as its first strategy.

The new fund offer will be open between October 1 and 15, Singh said, adding that he would ideally want investors to be invested for up to 2 years to derive the best returns on their bets.

Conceding that it will be a challenge to educate investors about the new product category for more sophisticated investors, which sits between MFs and alternative investment funds, Singh said the performance of the product should help attract more flows in the future.

He said back-testing of the product has shown that it is able to give decent returns, and added that the better tax treatment will make it more amenable.