Data-driven approach with fund manager insights sets us apart

The fund house also has the benefit of Jio’s large distribution ecosystem, which allows it to focus on direct-only plans for now. In this interview, Swaminathan talks about the fund’s plans, AI-driven products and more. Edited excerpts:

Can you walk us through the overall plan that you have for unfolding Jio BlackRock AMC?

With BlackRock bringing its tech platform, Aladdin, to India, asset managers can do everything in a very scalable, operationally safe manner. We also have our partner Jio, which allows us to access customers at scale in the digital ecosystem.

Our platform in BlackRock, systematic active equity (SAE), is a quantitative data-driven AI machine learning approach to equity investing. A computer does all the data crunching for you, and then you have the fund managers who can overlay some specific insights on it.

You can then input all of this into Aladdin. Next, run a portfolio-level optimisation using the risk model and an India-specific risk model built for the joint venture to generate a portfolio recommendation. If you aim to outperform a flexicap fund using these insights by X percent annually, with Y amount of risk relative to that benchmark, here is a suggested portfolio.

What about your products and their rollout?

We have launched three institutional-focused cash funds to start with. We are very happy with the kind of start that we got, and also the retail participation…about 67,000 investors in the first three NFOs since July.

We have also looked at the index funds. So again, in a way, bread and butter for BlackRock. The third set of funds in phase one will be more leaning towards the active side, with flexicap as the first one.

Some fund houses are more tilted towards growth, and some towards value. Is there an overarching philosophy for you?

The overarching philosophy is that it’s a data-driven approach. It allows us to use and leverage the data in many ways. For example, for this flexicap fund that we are going to launch, the fund managers will typically look to generate the alpha purely through stock selection.

Now the same data can be used to build another fund, which will come later. But instead of just having views on stocks, I may have views on factors. So I could have a growth tilted, or a value tilted fund, or I could do factor rotation…so we have all the insights to do that. Or rather than factors, we can have sectors.

So, as a fund house, our philosophy is to be data-driven and then deliver that in differentiated ways to our end customers.

Do you have an upper and lower limit to the number of stocks you would have in the fund?

Not necessarily. You would expect around 125 to 150 stocks, which is, again, a lot more than you would see in a typical flexicap where it’s probably 30 to 40. But you’re never going to see 500 stocks because, again, that’s an index fund.

You’ve chosen to take the direct route for distribution. What was the thinking behind this, and how will it pan out?

People are becoming increasingly comfortable managing their finances digitally on their phones. Our partnership with Jio, which has access to that ecosystem, gives us a clear understanding that this is the direction we want to pursue. We aim to see how direct digital approaches work.

We have the capacity to manufacture at scale, and if we can reach customers and offer them value digitally, that would be excellent. We can always consider growing, expanding, and exploring other options in the future.

The ₹24 tax filing product enables users to file their returns digitally. Would it accelerate your growth?

A lot of new products are coming online from JioFinance. Yes, like new functionality on the Jio Finance app will help accelerate our growth. Our presence will also accelerate Jio Finance’s growth, because people will get excited by things like the NFO periods going online.

We currently have 50 to 55 million unique permanent account numbers (PAN) in the mutual fund space. How large do you think the market can grow?

Fifty-five million is a very big number, but in the context of India, it’s still very small, right? We have just crossed 20% of AUM (assets under management) as a percentage of GDP. By comparison, the UK is at 80% and the US is at 150%. There can be some short-term blips that we have seen even in the last few weeks, but the overall macro is very sound. Demographics are very positive.

Tell us a little about your team

Our chief investment officer (CIO), Rishi Kohli, has been involved in the systematic quant investing space in India for many decades. In addition, two dedicated fund managers who previously worked at BlackRock have joined the team. There are also two dealers and a couple of researchers for the equity team. On the fixed income side, we have three fund managers, two dealers, and a couple of researchers.