Jio Financial joins BlackRock to launch asset management firm

Jio Financial Services Ltd, the demerged financial lending arm of Reliance Industries Ltd, and BlackRock, the world’s largest asset manager, have joined hands to set up an asset management company with a combined investment of $300 million.

On Wednesday, in a joint statement with BlackRock, Jio Financial said that the joint venture (JV), Jio BlackRock, would deliver “tech-enabled access to affordable, innovative investment solutions for millions of investors in India.”

The two partners plan to invest $150 million each in the JV, making it the 44th player in the `44.39 trillion Indian mutual fund industry, which is currently dominated by SBI Mutual Fund, ICICI Prudential Mutual Fund and HDFC Mutual Fund.

“This has the potential to disrupt the Indian MF market,” said a fund official requesting anonymity. “Jio’s technical know-how and expanding customer base, along with BlackRock’s proven global track record as a fund house, could change the industry dynamic.” He added that the JV would take upwards of 12 months to become operational.

However, A. Balasubramanian, chairman of the Association of Mutual Funds in India, disagreed about a new player disrupting the market. He said the MF industry was not about “selling products” but “generating returns” for investors, and that the success of a fund was predicated on that yardstick.

“The new player would expand the market and benefit the customer, but ultimately it will be the returns that decide the success of the fund house,” said Balasubramanian.

Incidentally, this is BlackRock’s second outing in the Indian MF industry. It quit a venture with DSP, called DSP BlackRock Investment Managers, in 2018 on the ground that, being a minority stakeholder with 40% equity, it was not able to integrate the business onto its operating platform.

Jio BlackRock will launch operations after the receipt of regulatory and statutory approvals. The company will have its own management team.

Jio BlackRock will bring BlackRock’s deep expertise and talent in investment management, risk management, product excellence, and access to technology, operations, scale and intellectual capital around markets, while Jio Financial contributes local market knowledge, digital infrastructure capabilities and robust execution capabilities.

Speaking on the transaction, Hitesh Sethia, president and chief executive of Jio Financial, said: “The partnership will leverage BlackRock’s deep expertise in investment and risk management along with the technology capability and deep market expertise of Jio Financial to drive digital delivery of products.

“India represents an enormously important opportunity. The convergence of rising affluence, favourable demographics, and digital transformation across industries is reshaping the market in incredible ways,” said Rachel Lord, chair and head of Asia Pacific, BlackRock. “We are very excited to be partnering with the JFS JV. Jio BlackRock will place the combined strength and scale of both of our companies in the hands of millions of investors in India.”