The co-founders of one of India's most successful exchange-traded funds are returning to the mutual fund industry after almost 15 years.
Rajan Mehta and Sanjiv Shah, who founded Benchmark Asset Management Co.—the mutual fund that launched the country's first ETF—have received final approval from the market regulator to launch Lakshya AMC.
“Our underlying philosophy will remain passive, and we are not going for the active route,” Mehta told Mint. "Doing stock picking based on research. That's not our core thing,” said the director and co-founder of Lakshya AMC.
The fund house does not plan to compete in crowded segments such as Nifty 50 or gold ETFs. “We would like to create different categories which do not exist today. We are not going to launch another Nifty 50 ETF or gold ETF, because there are so many people doing a good job at it,” Mehta said.
Lakshya AMC, which will file for a product with the Securities and Exchange Board of India (Sebi) soon, will initially focus on fixed-income passive products, using quant-based models. “We would like to create something very unique and new in this market,” Mehta said.
Passive funds gaining traction
The move comes at a time when passive assets in India have grown significantly, reaching ₹15.23 trillion over the past few years. They now account for about 18% of the mutual fund industry’s assets under management (AUM), up from 7.3% in FY20.
Major exchange-traded funds offered in India include equity ETFs tracking indices such as the Nifty 50 and the Sensex 30; fixed-income ETFs that invest in government and corporate bonds; and funds that track commodities such as gold and silver. There are also thematic and sectoral indices tracking a particular theme like innovation or consumption.
Nifty and Sensex ETFs dominate the category, accounting for about ₹6.2 trillion in assets as of February, according to a report by DSP.
Benchmark AMC, founded in 2001, launched the Nifty 50 Bees ETF, and has assets worth ₹57,632 crore as of the end of February. In 2011, it was acquired by Goldman Sachs AMC. Rajan Mehta left the company, while Sanjiv Shah stayed back. However, he also departed when Goldman Sachs AMC’s India operations were taken over by Reliance Nippon Life Asset Management in 2015. Currently, all the schemes are managed under Nippon Life Asset Management.
On managing costs in a passive-only model, Mehta said the segment faces structural headwinds in India. “We will definitely be earning less than equity funds. But then we have to keep the cost lower,” Mehta said.
The expense ratio of a passive fund is much lower than that of an active fund. For example, comparing the largest ETF by assets with the largest active fund by assets shows that the former has a direct total expense ratio of 0.04% while the latter has a direct total expense ratio of 0.63%.
“Distributors tend to maximise their earnings as active funds typically pay higher commissions compared to passive funds,” said Mehta.
“When a distributor recommends passive products, investors may question the value addition—why not just invest directly in a passive fund instead of going through a distributor? In contrast, with active funds, the intermediary can justify their role by saying they have analysed multiple funds, interacted with fund managers, and evaluated performance across different time periods before making a recommendation,” Mehta said.
This creates a perception of value addition, which helps justify commissions, he added.
In India, the number of registered investment advisors (RIA) who take a fixed fee for suggesting a product is very low, at around 906, as of September 2025, according to industry data. In comparison, there are 3,158 mutual fund distributors who get a commission from investors for the advice they provide.
Two other AMCs which do passives only for now are Zerodha Fund House and Angel One AMC. Both of these AMCs use a technology-first approach, which helps them keep their operating costs lower.
The AMC will be headquartered in Ahmedabad and also hire people from the same city to keep its cost lower. “A lot of talent is available in Ahmedabad due to its proximity to GIFT City,” Mehta said.