Story of NJ Fund and Mirae Fund

We had written a detailed note on Mirae Mutual Fund achieving Rs.1 trillion AUM in our previous blog. One can argue that Mirae is a global fund, but it is not a bulge bracket investment bank. Mirae has succeeded in a tough mutual fund market where formidable names like Fidelity, Morgan Stanley, Deutsche, JPM and Goldman Sachs saw little success. In the midst of this scenario, Mirae got to Rs.1 trillion AUM purely on the basis of past performance and led by an 84% contribution from equity-oriented funds. NJ India Mutual fund was unique in that it collected Rs. 5,200 crore in its maiden NFO of NJ Balanced Advantage Fund. It is the highest ever NFO collection by a maiden fund in India and is more than 4 times the size of the hitherto biggest maiden NFO collection by PGIM in the year 2007. The fund extensively relied on its network of agents to sell the fund. While the idea of balanced advantage fund was popularized by the SBI MF NFO, collecting such a large sum with little fund management background is surely commendable. This could set the tone for NJ’s thrust on passives in India. 

Why the Mirae story matter?

There are 3 things that the Mirae story has proven. Firstly, it proves that it is perfectly possible to attract investors purely on the strength of performance. It can happen purely by pull, and not focusing too much on push. Secondly, the Mirae story also proves that in any market it is essential to get the micro strategy right. That is where Mirae got its SIP pitch to work perfectly with the small investors. In a way, they were lucky that the MF folios showed exponential growth but that is true for all MFs. Lastly, it never chased debt AUM and focused purely on equity AUM. That strategy was unthinkable, but it worked well in the case of Mirae AMC. 

Why the NJ Fund story is huge?

Like the Mirae magic performance, the NJ Fund’s NFO success also has some key takeaways. Firstly, it proves that it is not just bancassurance plays that can make a success of NFO. Secondly, it has shown that a forward integration model can work wherein a distributor gets into the origination of mutual fund products. If this works, more distributors can leverage this opportunity. Lastly, NJ has also eliminated fund manager bias with its commitment to stick to passive funds. Even the balanced advantage fund will be a rule-based fund. In a way, the mutual fund segment is changing in India and these are the funds at the forefront of that really big change!