Whalesbook
New AMC Enters Market Amid Passive Investing Boom
The founders of Benchmark Asset Management, the firm that pioneered India's first exchange-traded fund (ETF), are set to launch Lakshya Asset Management Company (AMC) following regulatory approval. This marks their return to the mutual fund industry after a 15-year break, capitalizing on the growing trend towards passive investing. The Indian mutual fund industry closed December 2025 with ₹80.23 lakh crore in Assets Under Management (AUM). Passive funds accounted for ₹14.20 lakh crore, holding an 18% share, and saw a 31% year-on-year increase. This growth is driven by institutional flows and increasing adoption among individuals seeking cost-efficient investment avenues.
Lakshya AMC Bets on Unique Quant Strategy
Lakshya AMC's key difference is its planned proprietary quantitative (quant) strategies. Rajan Mehta, one of the founding partners, explained that their quant approach uses a formula to solve specific problems, rather than simple stock picking. The focus will be on structured, index-based solutions to find market gaps, similar to their past successes with products like Nifty BeES and Liquid BeES. This strategy aims to move beyond replicating existing offerings, positioning Lakshya AMC as an innovator. The firm will be the first mutual fund house based out of Ahmedabad, giving it a unique position.
The Crowded Indian Mutual Fund Landscape
The Indian passive fund market, while growing, is dominated by established players. As of Q1 FY26, SBI Mutual Fund led passive AUM with ₹3.73 lakh crore, followed by Nippon India Mutual Fund (₹1.95 lakh crore) and UTI Mutual Fund (₹1.60 lakh crore). Digital platforms like Zerodha and Groww also have substantial passive AUM, showing a diverse competitive set. While passive funds attracted over ₹1.35 lakh crore in calendar year 2025 until November, active fund categories like flexi-cap and mid-cap have also shown strong performance, indicating investors are interested in both. Investors increasingly favor low-cost, transparent, rules-based approaches, with passive funds expected to form a core part of long-term portfolios.
Economic Tailwinds and Investor Sentiment
Interest rates heavily influence investor appetite for mutual funds. Rising rates can increase borrowing costs for companies and potentially dampen equity market performance. Lower rates tend to support equities by reducing financing costs and encouraging investment. Market volatility also prompts investors toward the perceived safety and cost-effectiveness of passive funds. Analysts expect passive investing to continue growing, suggesting a future market structure where low-cost passive solutions form portfolio cores, supplemented by specialized active strategies.
Challenges for New Fund Houses in India
Launching a new AMC in India presents significant challenges. The market has 47 players, and new entrants often take 5-6 years or more to break even. Profitability is concentrated among established brands, with only about half of AMCs currently profitable. Lakshya AMC's success will depend on its ability to deliver a truly differentiated quant strategy that demonstrably solves problems. Regulatory scrutiny is increasing, with SEBI requiring strong surveillance and internal controls against front-running and insider trading. This could lead to higher operational costs and complexity, particularly for smaller firms. Building a credible track record for a new fund house usually takes 7-10 years. Past performance of similar liquid ETFs has shown modest returns, highlighting the need for realistic expectations.
Lakshya AMC's Path Ahead
Lakshya AMC is entering a dynamic and growing Indian mutual fund market, especially in the passive investing segment. The firm's focus on innovation and gap identification, combined with its founders’ pioneering experience, offers a potential to carve out a niche. The strategy's success will depend on successfully executing its unique quant approach and navigating a competitive, regulated market. The launch is expected within three months, aiming for wide distribution through intermediaries.