Upcoming stars?

Thanks to the growing popularity of mutual funds as an investment avenue, the Indian mutual fund industry is in a constant phase of evolution and expansion. Nevertheless, many small players still find it difficult to gain a meaningful market share in the industry. Even some prominent global players, including Fidelity, ING and Morgan Stanley, have found the going tough and decided to exit the Indian business over the past few years.

Amid this hyper-competitive environment, these six small AMCs have been able to gain much momentum in the last one year. A host of factors have paved the way for these AMCs to accelerate their journey.

Quant Mutual Fund
This fund house has been able to make the most of the bull run after the market crash of March 2020. Therefore, it has gained much attention. Unlike other fund houses, it focuses more on quantitative measures to run its funds.

Over the past one year, the assets managed by the AMC have grown by over 620 per cent to about Rs 8,800 crore from over Rs 1,200 crore, thereby moving from the 33rd position to the 26th position.

The AMC has leveraged the bull phase extremely well. Almost all of its funds are placed among the top three in their respective categories based on the past one-year performance. However, how effectively it manages the downside of the market is yet to be seen and we'd rather wait to see that before giving it a thumbs up. If it is able to navigate that well, it will pose a formidable challenge to its peers, given the fact that their conventional style of active management isn't keeping investors content.

PPFAS Mutual Fund
This decade-old fund house has hogged the limelight with its massive outperformance in recent years and its international allocation, which has lately delivered outsized returns, has played a meaningful role here. The AMC's flagship fund, Parag Parikh Flexi Cap Fund, is the fifth-largest fund in the category. According to Value Research's estimates, the fund attracted the maximum net inflows among all equity funds in 2021, which resulted in the rapid growth of its assets.

While the AMC's fortunes have turned for the better owing to its performance, there are near-term challenges. On the one hand, the US markets, which gave its returns a strong tailwind, are now doing poorly after a strong decade. On the other hand, international investing in India has come to a halt, with the RBI unwilling to extend the limits on investing abroad.

Nevertheless, the AMC has been able to build up strong credibility and trust with its open, honest communications and conduct. For instance, it has refrained from launching new funds unnecessarily over the last two years. Across the categories, the fund house has only four funds, with its conservative hybrid fund launched in May 2021.

Being one of the most admired AMCs in the industry today, it has a lot going in its favour and its flagship flexi-cap fund continues to be a top choice for long-term equity investors.

PGIM India Mutual Fund
Post the DHFL debacle in 2019, PGIM India Mutual Fund acquired the remaining 50 per cent stake in DHFL Pramerica Mutual Fund and gained full ownership of the fund house.

The DHFL episode led to a significant value erosion for the investors of some of its debt funds, while the AMC's debt AUM fell by over 21 per cent in a month, owing to the default in interest payments by the parent group.

Since then, the AMC has been in a rebuilding phase. While its debt side is yet to regain investors' confidence, its equity franchise has caught their notice, owing to its strong performance. Although on a small base, the equity AUM has grown over 14 times since the DHFL episode mainly on account of the rapid growth in the assets of its flexi-cap and mid-cap funds - both clocking over 200 per cent CAGR in the last three years.

This year, however, has been off to a sombre start, as most of its equity funds have found it difficult to keep up with an average peer in falling markets. We'd like to wait and watch.

Mahindra Manulife Mutual Fund
Established in 2016, this small AMC manages assets worth over Rs 9,300 crore across 19 schemes. Despite a muted start, the fund house has progressed slowly but steadily.

The AMC hired Krishna Sanghvi, a veteran equity fund manager, as the CIO - Equity in 2019 and thereafter, the performance of the fund house has been on a steady rise. Sanghvi was widely credited for the strong performance of Canara Robeco AMC's equity funds in the past years and he's off to a pretty promising start at Mahindra Manulife, if the performance of 2021 is anything to go by. While Sanghvi has been working on ramping up the investment team, the brand 'Mahindra' and its vast distribution network are other positives.

Of course, Sanghvi's continuance with the AMC and his ability to lead the AMC to the success path with consistency will play a critical role. Especially, with two job switches in the last four years, Sanghvi's track record of continuity isn't much inspiring and that's something to watch out for.

Edelweiss Mutual Fund
An established player, Edelweiss Mutual Fund has achieved impressive growth, thanks to its Bharat Bond ETFs. The fund house currently manages assets worth over Rs 94,400 of which, assets worth over Rs 56,600 are managed across the Bharat ETF and FOF series. In fact, Bharat Bond ETFs have created a new product segment of target maturity funds. With the success of such funds against the backdrop of a volatile debt market, several fund houses have come up with such funds to join the bandwagon but they are yet to catch investors' eye in a significant way. As the debt market is witnessing turbulence, there is a growing appetite for products like target-maturity types. The Bharat Bond series, with its unique positioning, can continue to be the prime beneficiary, thereby taking Edelweiss higher up the pecking order. As for investors, the Bharat Bond franchise should continue to appeal to those having a defined investment horizon and looking for dependable (though modest) returns with predictability and safety.

NJ Mutual Fund
The largest distributor of mutual funds entered the fund-management business with a bang. The AMC raised over Rs 5,200 crore in its maiden NFO, a balanced advantage fund, that catapulted it to the 27th rank in an industry of 42 players right from day one.

The parent NJ group's strong country-wide reach gives it a huge advantage over other small players. With a spectacular start in terms of the assets, the fund house now needs to focus on putting an impressive performance record and building a suite of sensible products over a period of time. From an investors' standpoint, these are still early days. Let its story unfold before jumping in.

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