Zerodha has announced that it will enter the mutual funds business. The company will form a joint venture (JV) with fintech company smallcase for the MF sector. Zerodha will focus on building “simple low-cost passive mutual fund products for India.” The development was confirmed by the company’s CEO and founder Nithin Kamath on Wednesday, April 12.
“While awaiting the final approval of our Asset Management Company (mutual fund), we asked if we should build it ourselves or collaborate. Given the 6+ years of experience that Smallcase has in building investment products, it made perfect sense to create a joint venture (JV) to build the AMC,” Kamath tweeted.
While awaiting the final approval of our AMC (mutual fund), we asked if we should build it ourselves or collaborate. Given the 6+ years of experience that @smallcaseHQ has in building investment products, it made perfect sense to create a joint venture (JV) to build the AMC. 2/3— Nithin Kamath (@Nithin0dha) April 12, 2023
Kamath also talked about the products the joint venture will offer to customers.
I'm super happy to announce that @smallcaseHQ will help @zerodhaonline build simple low-cost passive mutual fund products for India. 3/3— Nithin Kamath (@Nithin0dha) April 12, 2023
Vasanth Kamath, founder of smallcase, also issued a statement on the joint venture and said that it will help introduce mutual funds to a new generation of investors. “The upcoming AMC will be a joint venture between Zerodha & smallcase and will use learnings & shared values from both cos to build an enduring fund house,” he wrote on Twitter.
Very excited for @smallcaseHQ to partner with @zerodhaonline to help introduce a new generation of investors to mutual funds. The upcoming AMC will be a joint venture between Zerodha & smallcase and will use learnings & shared values from both cos to build an enduring fund house https://t.co/fsHzUuCGnM— Vasanth Kamath (@vasanthkamath) April 12, 2023
The smallcase founder called the development an important step in their mission to build a next generational investment product layer, which is powered by unique technology and platforms.
“In the last 6 yrs, smallcases have been successful in helping millions of demat account holders build a healthy long-term portfolio & there’s immense potential to bring the same principles of simplicity & transparency to mutual funds to bring in a new segment of investors,” Vasanth Kamath added.
In the last 6 yrs, smallcases have been successful in helping millions of demat account holders build a healthy long-term portfolio & there's immense potential to bring the same principles of simplicity & transparency to mutual funds to bring in a new segment of investors— Vasanth Kamath (@vasanthkamath) April 12, 2023
Very excited for @smallcaseHQ to partner with @zerodhaonline to help introduce a new generation of investors to mutual funds. The upcoming AMC will be a joint venture between Zerodha & smallcase and will use learnings & shared values from both cos to build an enduring fund house https://t.co/fsHzUuCGnM— Vasanth Kamath (@vasanthkamath) April 12, 2023
Sequoia-backed smallcase offers people a chance to invest in the stock market through portfolios of stocks or exchange-traded funds (ETFs). The company had earlier collaborated with Zerodha for thematic investment in 2016. The thematic investments included portfolios holding between 10-20 stocks. The themes were based on long term trends, policy reforms by the government, sectoral shifts, technology, demographics and culture.
The Securities and Exchange Board of India (SEBI) had given in-principle approval to Zerodha in 2021 for its mutual fund application. Nithin Kamath had told Moneycontrol last year that the company would launch its mutual fund product within three months of the final approval from SEBI.
He had earlier stated that the mutual fund arm would provide index funds like the Vanguard Retirement Fund, which are used for accumulating wealth for retirement.
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