MF roster swells to 50: 8 licences issued in 2 years, 8 more await Sebi nod

Competition in the mutual fund (MF) industry is heating up with the entry of a raft of new players over the past two years.

The MF player count, which hovered around 40 for over a decade, has risen to 50, with eight new licences issued in the past two years. The most recent entrants include JioBlackRock, The Wealth Company, and Choice. 

The surge in interest in the MF business comes after nearly five years of high growth. The industry has seen a threefold increase in assets during this period, as a rising equity market expanded the investor base. 

This phase has also been marked by growing adoption of systematic investment plans for MF investing, ensuring a consistent flow of investments into the industry. 

“MFs are becoming the preferred way for Indians to invest in markets, and that’s attracting a new wave of entrants. With rising investor participation, digital distribution, and regulatory clarity, the economics of running a fund house now look more promising

than ever,” remarked Dhirendra Kumar, chief executive officer (CEO) of Value Research. 

The easing of entry barriers and the recent introduction of a new business segment in specialised investment funds (SIFs) have attracted new players to the industry, which boasts a high return on equity thanks to its asset-light nature. 

“With the announcement of SIFs as an additional category for fund houses, a number of portfolio management services (PMS) players are applying for MF licences. There are two reasons. First, as a defence against the threat of many customers switching to the more tax-efficient SIF. Second, to expand their offerings to a much larger customer base, as the minimum investment amount in SIFs is only ₹10 lakh compared to ₹50 lakh for PMS,” said Sunil Subramaniam, market expert and a former MF CEO. 

PMS and alternative investment fund managers dominate the list of recent MF licence applicants. These include Abakkus Asset Manager, Monarch Networth Capital, Nuvama Wealth Management, Ashika Credit Capital, Carnelian Asset Management & Advisors, Alpha Alternatives Fund Advisors, Estee Advisors, and Oaklane Capital Management. 

The growing number of MF players is also in line with the Securities and Exchange Board of India’s (Sebi’s) plans to expand the industry. 

 

In 2020, the regulator introduced an alternative set of criteria for interested companies unable to meet the profitability requirement. This move opened the MF gates for new companies, especially fintechs. 

Later, in 2023, Sebi amended regulations to allow private equity firms to sponsor MFs. 

“The modification of MF regulations is setting the stage for a new era of inclusive financial growth in India. By simplifying rules and expanding investor choice, the regulator is making it easier for savers across all income and location brackets to participate in wealth creation,” said Debashish Mohanty, chief strategy officer, The Wealth Company. 

According to experts, while entering the industry might be easy, scaling up could prove challenging. “While starting up is easy, building trust and long-term performance is the real test,” said Kumar. 

The top 10 MF players account for over 75 per cent of the ₹75 trillion assets under management industry.