Zerodha’s AMC Arm Takes Shape, Launches Maiden Mutual Funds

Months after receiving the final approval from the Securities and Exchange Board of India (SEBI) for its asset management company, Zerodha on Wednesday (October 25) announced the launch of its maiden mutual funds — Zerodha Nifty LargeMidcap 250 Index Fund and Zerodha ELSS Tax Saver Nifty LargeMidcap 250 Index Fund. 

The new fund offer (NFO) for the two funds opened on October 20 and will close on November 3. 

In a statement, Zerodha Fund House said the two funds will be open-ended, passive and index equity mutual fund schemes. The two will be benchmarked against the Nifty LargeMidcap 250 Index TRI (total returns index).

Elaborating on the same, Zerodha said that while the index fund will replicate the Nifty LargeMidcap 250 Index, the ELSS scheme will be an open-ended passive equity linked savings scheme with a statutory lock-in period of three years. 

For the uninitiated, Nifty LargeMidcap 250 Index reflects the performance of large and midcap companies listed on the NSE, comprising stocks of the Nifty 100 Index and the Nifty Midcap 150 Index.

While the index fund will entail a minimum SIP investment of INR 100, the minimum threshold for the ELSS fund has been set at INR 500. 

“We are very excited to announce the launch of our first NFO. We believe there is a massive opportunity to help more Indians access the capital markets through simple products and exposures, and that’s what we’re committed to do…,” said Zerodha Fund House chief executive officer (CEO) Vishal Jain.

This comes just two months after the invest tech major received final approval from the markets regulator to commence the operations of its asset management company (AMC) in August. 

A joint venture between Zerodha and investment and Sequoia-backed invest tech platform smallcase, Zerodha Fund House claims to be a passive-only AMC that aims to build transparent and affordable mutual fund offerings. 

Earlier, Zerodha cofounder and CEO Nithin Kamath said that the move to venture into the space was largely led by consideration around increasing retail investor participation in Indian markets and building simple, easy-to-understand mutual funds. 

“Our motivation to start a mutual fund was twofold. The first was that the biggest challenge and opportunity for Indian markets is the shallow participation. Even after all the growth over the last 3 years, we only have maybe 6-8 Cr unique mutual fund and equity investors put together,” Kamath said then. 

The fund launch comes at a time when the competition appears to be heating up in the Indian AMC space. Earlier this year, deep-pocketed Indian conglomerate Reliance Jio teamed up with BlackRock to enter the Indian asset management market.

On top of that, competitor Groww, in September, also secured approval from SEBI to launch its first index fund. Earlier this month, Mumbai-based Neo also bagged $35 Mn funding in a round led by Peak XV Partners to build products in the financial advisory and asset management space.