India’s mutual fund industry is witnessing a notable comeback as experienced founders return with a fresh, passive-focused strategy aimed at innovation and cost efficiency.
After more than 14 years, former Benchmark AMC co-founders Rajan Mehta and Sanjiv Shah are making a comeback to the mutual fund business. New, distinctive items are the focus. Will the plan be successful?
Return of Benchmark Founders to Mutual Fund Industry
📈 Lakshya AMC Comeback
- Founders: Rajan Mehta & Sanjiv Shah
- Return Gap: After 14+ years
- New Venture: Lakshya AMC
- Strategy: Passive investment approach
- Focus: Unique & new product categories
- Goal: Disrupt traditional mutual fund space
After nearly 15 years, the co-founders of one of the most prosperous exchange-traded funds in India are making a comeback to the mutual fund business.
The market regulator has given Rajan Mehta and Sanjiv Shah, former co-founders of the mutual fund that launched Benchmark Asset Management Co., India’s first exchange-traded fund, final license to open Lakshya AMC.
Passive Strategy and Market Positioning
Mehta told Mint, “We are not opting for the active way, and our basic attitude will stay passive.” doing research-based stock selection. The director and co-founder of Lakshya AMC stated, “That is not our fundamental thing.”
The fund house has no intention of competing in congested markets like gold ETFs or the Nifty 50. “We want to establish new categories that do not now exist. Since so many individuals are doing a great job at it, we will not be launching another Nifty 50 ETF or gold ETF, Mehta stated.
Growth of Passive Investment Market in India
The action takes place at a time when India’s passive assets have increased dramatically over the last several years, reaching ₹15.23 trillion. From 7.3% in FY20, passive assets currently make up around 18% of the mutual fund industry’s AUM.
Lakshya AMC will soon submit a product application to the Securities and Exchange Board of India (Sebi), with an initial concentration on quant-based fixed-income passive products. Mehta stated, “We would like to produce something absolutely distinctive and different in this industry.”
💰 Passive Funds Cost Strategy
- Revenue: Lower than active funds
- Expense Ratio: Extremely low
- Challenge: Cost management
- Distributor Issue: Lower commissions
- Solution: Lean operations
- Location: Ahmedabad base
Cost Challenges and Distributor Dynamics
Mehta stated that the segment confronts fundamental challenges in India when it comes to cost management under a passive-only paradigm. “We will undoubtedly make less money than equity funds. However, we must maintain the reduced cost,” Mehta stated.
A passive fund’s expense ratio is significantly lower than an active fund’s. The largest ETF by assets, for instance, has a direct total expense ratio of 0.04%, but the largest active fund by assets has a direct total expense ratio of 0.63%.
According to Mehta, “distributors tend to maximize their earnings because active funds often offer larger fees compared to passive funds.”
Investor Behavior and Industry Structure
Investors may wonder about the value addition when a distributor suggests passive products. Instead of using a distributor, why not invest directly in a passive fund? On the other hand, when it comes to active funds, the intermediary can defend their position by claiming that, before to making a recommendation, they have examined several funds, communicated with fund managers, and assessed performance across various time periods, according to Mehta.
He continued, “This helps justify commissions by creating an impression of value addition.” According to industry data, there are only about 906 registered investment advisors (RIA) in India who charge a set fee for recommending a product as of September 2025. In contrast, 3,158 mutual fund distributors receive commissions from investors in exchange for their recommendations.
Technology, Competition, and Legacy
Zerodha Fund House and Angel One AMC are two additional AMCs that currently only do passives. These two AMCs prioritize technology, which lowers their operating expenses. In order to keep costs down, the AMC will have its headquarters in Ahmedabad and employ locals. “Ahmedabad has a lot of talent because it is close to GIFT City,” Mehta stated.
Founded in 2001, Benchmark AMC introduced the Nifty 50 Bees ETF, and as of the end of February, its assets totaled ₹57,632 crore. When Goldman Sachs AMC purchased it in 2011, Rajan Mehta departed, but Sanjiv Shah stayed. However, he left after Reliance Nippon Life Asset Management acquired Goldman Sachs AMC’s Indian operations in 2015. At the moment, Nippon Life Asset Management oversees all of the schemes.
Disclaimer: This content is for informational purposes only and does not constitute financial or investment advice. Investment decisions should be made based on individual research and consultation.
