Angel One Mutual Fund eyes distribution edge to ace passive race

The passive-only fund house to leverage both online, traditional channels

Angel One Mutual Fund (MF), the latest entrant in the fast-growing asset management industry, will focus solely on the passive space. While there are several players actively working in the passive space, Angel One MF says it has a point of differentiation.

 

The fund house, according to its Chief Executive Officer Hemen Bhatia, will not just focus on the direct distribution channel like others but will also leverage the individual distributor channel to its fullest.

 

Direct plan distribution happens through online investment platforms, registered investment advisors, and the asset management company’s (AMC’s) website. Regular plans, which are costlier compared to direct plans as they pay commissions to the distributor, are mostly sold by banks and individual distributors.

 

 

So far, passive fund distribution has largely been limited to direct channels, as regular plan distributors prefer active funds due to a better commission structure.

 

Bhatia, who was previously head-ETF at Nippon India AMC, says the industry has not used the regular distribution channel effectively to sell passive schemes.

 

“Passive investing is a proven investment concept and can be highly beneficial for investors. We are open to collaborating with everyone. Whether a distributor chooses to pick up and promote the product will ultimately depend on their distribution strategy, but for those who do, we are committed to working closely with them," he said.

 

The fund house has brought in two other top executives from Nippon India AMC. Mehul Dama has joined as chief investment officer and Sameer Desai as chief business officer.

 

The passive fund space, which has grown multifold over the past few years, has seen heated competition after the pandemic. The Rs 11 trillion market segment has seen sharp cuts in fund management fees in recent years. While some funds have done so to bid for inflows from the Employees’ Provident Fund Organisation, others lowered the charges to remain competitive or to mark their entry into the passive space. The expense ratio (as a percentage of assets under management) is as low as 0.03 per cent for passive funds tracking Nifty 50 and Sensex.

 

Shrinking margins, according to Bhatia, are not a major worry for the fund house as it sees active funds as bigger competition.

 

“Competing on pricing is not our primary focus. Our goal is to highlight the benefits of passive investing, its value for investors, and its importance in a diversified portfolio,” he said.

 

The fund house has selected the Nifty Total Market Index Fund as its first fund. It is awaiting approval from the regulator to launch the fund.

 

“The idea behind this fund is to launch a straightforward product, something for anyone looking to ride the India growth story with a single, comprehensive solution for their portfolio. It is a basic building block for all portfolios, as it eliminates the guesswork of selecting largecap, midcap, smallcap, and microcap segments as well as sectors, investment styles, etc,” Bhatia said.