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Business News/ Money / Personal Finance/  ‘The core of NJ AMC’s offering will be rule-based products’

‘The core of NJ AMC’s offering will be rule-based products’

There is a growing opportunity in rule-based investing that has attracted a lot of attention and AUM in developed markets, which is more or less missing in India, says Rajiv Shastri, CEO, NJ Asset Management

Rajiv Shastri, chief executive officer, NJ Asset Management.Premium
Rajiv Shastri, chief executive officer, NJ Asset Management.

NJ India Invest, one of India’s largest mutual fund distributors, was granted a licence by Sebi to launch a mutual fund on 30 April. In an interview, Rajiv Shastri, CEO, NJ Asset Management, spoke about his plans for the asset managem-ent company. Edited excerpts:

Can you give us some background on NJ India Invest in terms of AUM, distribution network and PMS business and how they have evolved since inception?

NJ Wealth is Asia’s largest financial partner network with more than 39,000 partners and close to 1,500 employees across 95 offices in India. As a mutual fund distributor, NJ Wealth contributes more than 95,000 crore of the MF industry’s current AUM. NJ Group’s portfolio management service (PMS) was established in 2010 with the goal of introducing data-driven and rule-based investment methodology to discerning investors, Today, NJ PMS, which is a part of NJ Asset Management, manages close to 2,200 crore in assets, making it among the largest portfolio managers in the country. With these learnings, we feel that the time is now appropriate to take this investment philosophy to retail investors as well.

Based on our understanding of investors and distributors, we believe that the retail marketplace is ready to welcome this opportunity to diversify.

Are there any major gaps in the MF industry in India today? Are there investor needs or strategies that are simply not being fulfilled that you intend to cover?

As things stand, the equity MF industry today is dominated by actively managed funds and participants that focus predominantly on active fund management. As a result, almost the entire equity allocation of most MF investors is in actively managed equity funds. This also means that there are quite a few viable options available to investors in the active space.

On the other hand, there is a growing opportunity in rule-based investing that has attracted a lot of attention and AUM in developed markets, which is more or less missing in India. A cursory look at fund flows indicates that not only a bulk of fresh flows but also a dominant portion of assets are now managed through rule-based methodologies in developed markets. This is an almost vacant space in the Indian retail MF marketplace, which we plan to inhabit.

What are your plans for the AMC? Can you elaborate on the smart beta + passive strategy that you intend to follow?

Our focus is on offering products that are differentiated at their very core. Non-active investing has two large subsets: passive and rule-based. The former replicates popular indexes. The latter, which is also called smart beta and other similar names, works by identifying portfolio attributes that contribute to performance based on an analysis of past data, devising rules that allow a portfolio to benefit from these attributes and finally, using these rules to invest. There is no human discretion at the investment stage, which eliminates all human biases. And since this is completely different from any active investment methodology, it offers a diversification opportunity to investors.

The core of our offering will be rule-based products for the large market segment where high quality and deep data is available. We will supplement these with passive products in market segments where data is not so easily available.

Any plans on the debt side and international funds?

For corporate debt, the availability as well as quality of data is a concern, so we are not actively considering a presence at the moment. On the international fund side, there are quite a few active and passive opportunities available to investors. We do see an opportunity for rule-based products in this segment as well.

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Neil Borate
Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
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Published: 10 May 2021, 12:55 AM IST
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