Zerodha's Nithin Kamath announces JV with smallcase for mutual fund business

India's biggest stockbroker Zerodha has said that it will join hands with wealth management company smallcase to foray into the mutual fund business. Zerodha CEO Nithin Kamath confirmed the news on Twitter, which was retweeted by Vasant Kamath, founder of smallcase. smallcase and Zerodha are both Bengaluru-based start-ups, where Zerodha is one of smallcase's investors.

In 2021, Zerodha received in-principal approval from the Securities and Exchange Board of India (Sebi) on its mutual fund application. Zerodha will be focusing on building low-cost passive mutual fund products, Nithin Kamath said in his tweet.

On Wednesday, Nithin wrote: "What worked well in the journey of @zerodhaonline was to collaborate vs trying to build everything ourselves. It started with Kite Connect APIs that allowed startups to build on top of us (broking as a service). It led to @Rainmatterin & our first partnership @smallcaseHQ. I'm super happy to announce that @smallcaseHQ will help @zerodhaonline build simple low-cost passive mutual fund products for India."

In a separate thread of tweets, Vasanth said the upcoming AMC will be a joint venture between Zerodha and smallcase and will use learnings and shared values from both companies to build an enduring fund house.

He said: "The opportunity to increase capital market participation for retail investors is massive, and we believe that mutual funds will continue to accelerate this trend with the right mix of products, solutions & technology."

Fintech start-up Smallcase was founded in 2016 by IITians Vasanth Kamath, Anugrah Shrivastava, and Rohan Gupta. The fintech startup allows retail investors to invest in portfolios of broker-partner stocks and exchange-traded funds (ETFs).

Talking about the new joint venture with Zerodha, Vasanth added: "This is an important step in our mission to build the next gen investment product layer, powered by unique technology and platforms (Publisher/Gateway/Tickertape). Grateful to all our users & partners for their continued trust & support in helping us change how India invests."

Zerodha, since its launch, has been working on to bring down the transaction costs in its brokerage business. The firm had planned to launch low-cost funds.

As per the latest AMFI data, the mutual fund industry in India is worth Rs 40 lakh crore and has over 40 firms offering their unique products, as on February 28.

The assets under management of the Indian MF Industry have grown five folds from Rs 8.14 lakh crore in February 2013 to Rs 39.46 lakh crore in February 2023 in a span of 10 years.

The total number of accounts (or folios) as on February 28, 2023, stood at 14.42 crore (144.2 million), while the number of folios under Equity, Hybrid and Solution Oriented Schemes, wherein the maximum investment is from the retail segment stood at about 11.54 crore.

Recently, Bajaj Finserv received Sebi's approval to enter the mutual fund segment. It has already filed for seven MF schemes with Sebi. These are Bajaj Money Market Fund, Bajaj Overnight Fund, Bajaj Arbitrage Fund, Bajaj Large and Mid Cap Fund, Bajaj Liquid Fund, Bajaj Balanced Advantage Fund, and Bajaj Flexi Cap Fund.

It plans to launch in major equity categories such as flexi-cap, large- and mid-cap, balanced advantage and arbitrage funds. It will also make its entry into debt funds with the launch of liquid fund, money market and overnight fund.

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