The mutual fund industry is undergoing several kinds of changes and expansions. While the markets are at an all-time high, a significant development might shake up the asset management business. The world’s largest Asset Management Company is returning to India, and it is doing so in partnership with Reliance Industries Ltd. (RIL), which is owned by Asia’s richest man Mr Mukesh Ambani, one of the biggest companies in India.
On July 26, 2023 Wednesday, Jio Financial Services and BlackRock announced an agreement to establish Jio BlackRock as a joint venture, in order to serve India’s expanding investor base. The US-based investing powerhouse is creating a 50:50 joint venture with Jio Financial Services (JFS) with a combined investment of $300 million to launch an asset management company. The joint venture, known as Jio BlackRock, aims for an initial investment of $150 million each from JFS and BlackRock.
Following the conclusion of the $20 billion demerger of the business, Reliance Industries Ltd. recently changed the name of the financial services company Reliance Strategic Investments to Jio Financial Services. At the same time, this venture will mark a comeback in India for Wall Street’s crusader Larry Fink, chairman of BlackRock, five years after parting ways with long-time partner Hemendra Kothari of DSP Mutual Fund.
After the global financial crisis, BlackRock replaced Merrill Lynch as the Indian partner in DSP group’s mutual fund business in India. However, BlackRock withdrew from a partnership with DSP AMC, known as DSP BlackRock Investment Managers, in 2018, claiming that as a 40% equity minority owner, it was unable to integrate the company into its operational platform. Thus, this project marks BlackRock’s return to the Indian mutual fund market.
About Jio Financial Services
As a digital-first entity, Jio Financial Services has expressed interest in the loan industry as well as other financial services sectors, including insurance, payments, digital broking, and asset management. As an addition to and replacement for the conventional credit bureau-based underwriting, Jio Financial Services intends to introduce a consumer and merchant lending business based on its proprietary data analytics.
What are the key takeaways for investors from Jio Financial Services and BlackRock’s joint venture?
World’s largest asset manager partners with Jio Financial Services to enter India’s asset management market.
Jio Financial Services, the demerged financial lending arm of Reliance Industries, and BlackRock, the world’s largest asset manager, have teamed up to establish an asset management business that will provide a ‘Digital-first asset management platform’ with cost-effective, cutting-edge investment options for millions of investors in India. Following statutory and regulatory approval, the joint venture will introduce a ‘tech-enabled’ service, and the business will have its own management team.
Commenting on the tie-up with Jio Financial Services, Rachel Lord, Chair and Head of APAC, BlackRock said, “Jio BlackRock will place the combined strength and scale of both companies in the hands of millions of investors in India. India represents an enormously important opportunity for the global asset management giant to expand and create a strong footprint in the mutual fund business through this forthcoming joint venture. The convergence of rising affluence, favourable demographics, and digital transformation across industries is reshaping the market in incredible ways.”
According to US SEC statements, BlackRock managed assets valued at nearly $8.6 trillion as of December 2022. That is more than double the market value of the BSE, which is over $3.7 trillion.
On the other hand, Jio Financial Services contributes local market knowledge, digital infrastructure capabilities, and robust execution capabilities. Speaking on this transaction, Mr Hitesh Sethia, CEO of Jio Financial Services, stated, “This is an exciting partnership between JFS and BlackRock, one of the largest and most respected asset management companies globally. The partnership will leverage BlackRock’s deep expertise in investment and risk management, along with the technology capability and deep market expertise of JFS, to drive the digital delivery of products. Jio BlackRock will be a truly transformational, customer-centric, and digital-first enterprise with the vision to democratise access to financial investment solutions and deliver financial well-being to the doorstep of every Indian.”
“The partnership will introduce a new player to the India market with a unique combination of scope, scale, and resources,” both companies said in a joint statement.
Download: Press Release – Jio Financial Services and BlackRock Agree to Form Joint Venture
India’s asset management industry has seen rapid growth in recent years and has 44.3 trillion Indian rupees ($540.4 billion) in assets under management. With BlackRock’s established worldwide track record as a fund house and Jio’s technical know-how with a growing client base, the industry dynamic may shift.
Commenting on the Jio BlackRock venture Mr A Balasubramanian, Chairperson of the Association of Mutual Funds in India (AMFI), said, “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.”
This article first appeared on PersonalFN here