JioBlackRock Mutual Fund launches 5 index funds. Should you consider investing in these passive funds?

JioBlackRock Mutual Fund, a 50:50 joint venture between Jio Financial Services Limited (JFSL) and BlackRock, has announced the launch of five new passive index funds, marking its debut in the Indian mutual fund space. These funds are open for subscription, will close on August 12 and will reopen for continuous sale and repurchase within five business days of the allotment date.

The five index funds are – JioBlackRock Nifty Midcap 150 Index Fund, JioBlackRock Nifty Next 50 Index Fund, JioBlackRock Nifty Smallcap 250 Index Fund, JioBlackRock Nifty 8-13 yr G-Sec Index Fund, and JioBlackRock Nifty 50 Index Fund.

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With these funds being associated with BlackRock’s global name, even though they’re new in India, a market expert recommends that BlackRock is the world’s largest asset manager and has deep experience in managing passive strategies globally through its iShares platform. However, the Jio BlackRock venture is new to the Indian market, so investors should be cautious and track local execution quality, tracking error, service standards, and expense ratios.

As the fund house is now offering five passive funds, the expert adds that for passive funds, the global brand backing offers some comfort but it is still wise to wait before allocating whereas for active funds, it is advisable to wait and observe performance and fund manager track record even more.

“Key factors to evaluate passive funds can be expense ratio, AUM size, tracking error, etc. For active funds, the evaluation becomes broader and includes additional aspects like fund manager track record, investment strategy, portfolio turnover, consistency of performance and so on,” Vishal Dhawan, CEO of Plan Ahead Wealth Advisors, a wealth management firm in Mumbai, shared with ETMutualFunds.
Sharing a similar opinion, another expert says that oJio BlackRock AMC has entered into the mutual fund industry with a set of passive fund offerings, including index funds and debt funds. While BlackRock brings global experience and a strong reputation in asset management, it’s important to consider that they are new to the Indian market and have not yet demonstrated performance across different domestic market cycles.
“While evaluating AMC, investors should consider evaluating parameters such as AMC performance across market cycles, investment style & strategy, and alpha generation potential. Investors should not rely solely on the global brand name. A fund’s strategy alignment and AMC’s domestic execution are more critical factors when making an investment decision,” Shweta Rajani, Head – Mutual Funds, Anand Rathi Wealth Limited told ETMutualFunds.
Out of these five funds, four are equity-oriented index funds, whereas one is a debt-oriented index fund.

These index funds focus on small-ticket investments and bypassing distributors to reduce costs. Being passive funds, they aim to mirror index performance instead of beating it, thus keeping fund management costs lower than actively managed funds.

There are four equity based passive funds which are focusing on different indices such as Nifty50, Nifty Next 50, Nifty Smallcap 250, and Nifty Midcap 150 Index. Among these different options available, Dhawan recommends considering large-cap index funds as a safer choice during current market valuation and volatility and the new investors can also consider investing in these funds using SIPs or STPs.

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“Given current market valuations, especially elevated forward valuations in mid and small caps, large-cap index funds are a safer choice. New investors can consider starting with low-cost passive funds focused on large-cap indices like the Nifty 50. Using SIPs or STPs to stagger investments can help manage volatility better,” Dhawan recommends.

Passive funds, also known as index funds, aim to replicate the performance of a specific market index. Instead of trying to outperform the market, passive funds seek to match the returns of the benchmark index.

A passive fund tracking the BSE Sensex would buy only the shares that are part of the composition of the BSE Sensex. The proportion of each share in the scheme’s portfolio would also be the same as the weightage assigned to the share in the computation of the BSE Sensex. Thus, the performance of these funds tends to mirror the concerned index. They are not designed to perform better than the market. Such schemes are also called index schemes. Since the portfolio is determined by the index itself, the fund manager has no role in deciding on investments. Therefore, these schemes have low running costs.

These funds being passive funds, Shweta Rajani recommends avoiding investing in these funds as they tend not to generate alpha and do not undergo regular portfolio rebalancing like active funds and new investors can consider investing across existing diversified active equity funds, such as market-cap-based funds and strategy-based funds, such as value and contra funds.

JioBlackRock Mutual Fund NFO details

The schemes will offer only direct plans, and further, the plan shall offer only a growth option. The minimum application amount for lumpsum investment in all five funds is Rs 500, and any amount thereafter. For SIP, the minimum application amount in all funds is Rs 500 and in multiples of Re 1 thereafter.

JioBlackRock Nifty Midcap 150 Index Fund, JioBlackRock Nifty Next 50 Index Fund, JioBlackRock Nifty Smallcap 250 Index Fund, and JioBlackRock Nifty 50 Index Fund – the equity-oriented index funds will be managed by Tanvi Kacheria, Anand Shah, and Haresh Mehta.

JioBlackRock Nifty 8-13 yr G-Sec Index Fund will be managed by Vikrant Mehta, Siddharth Deb, and Arun Ramachandran

On July 29, the fund house, while hinting at the upcoming launch, posted on the social media platform X that, “Different needs. Different index funds. From large-cap stability to small-cap potential, and aiming to stabilise the portfolio with government-backed securities. Explore all five index funds, built to match the way you invest. Create an account and get investment-ready. Download JioFinance App today.”

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Are you wondering for the investors with the long-term investment horizon which one is a better bet – diversifying across these new Jio BlackRock index funds or sticking with familiar options?

In response to this, Dhawan clarifies that for long-term investors, it may be preferable to stick with well-established index funds from reputed AMCs, given their proven track record, scale, and reliability however, Jio BlackRock funds, being new, should be monitored over time using parameters like expense ratio, tracking difference, and AUM size, and compared against existing schemes on these metrics before allocating meaningfully.

The expert from Anand Rathi Wealth also goes by the view that for long-term investing, it is recommended to avoid investing in NFOs as they are new to the market and not experienced across different market cycles to understand the fund manager agility across the market cycles.

“Instead, investors can consider investing in an active diversified equity which is at least 3 years old and can consider investing across market cap-based funds and strategy-based funds with a market cap allocation of 55:20:25 across large, mid, and small caps. This will help to ride across the market cycles and generate consistent alpha over the long term,” Shweta Rajani said.

In May end, JioBlackRock Asset Management received SEBI’s approval to commence mutual funds business. At the time of launch, the fund house said that for retail investors, the offering will also be distinctive for its digital-first customer proposition. “JioBlackRock Asset Management aims to launch a range of investment products, including those that apply BlackRock’s industry-leading capabilities in data-driven investing, over the coming months.”

“India’s rapid growth is driven by a new generation with bold aspirations. Our partnership with BlackRock is a powerful combination of global investment expertise and Jio’s digital-first innovation. Together, we are committed to making investing simple, accessible, and inclusive for every Indian. I am confident that JioBlackRock Asset Management will play a transformative role in shaping the future of financial empowerment in India,” Isha Ambani, Non-Executive Director, JFSL said at the time of launch.

The three debt funds – JioBlackRock Liquid Fund, JioBlackRock Money Market Fund, JioBlackRock Overnight Fund which were open for subscription last month together received a total investment of Rs 17,800 crore (USD 2.1 billion) and attracted investments from over 90 institutional investors, reflecting confidence in JioBlackRock Asset Management’s value proposition that combines data-driven investing and a digital-first approach, according to a press release by the fund house.

JioBlackRock Mutual Fund has launched Aladdin which is BlackRock’s unique investment analytics and risk management platform.

One should always consider risk appetite, investment horizon, and goals before making any investment decisions.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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