Breakingviews - India's wealth boom is within reach for foreigners

Reuters

12-06-2025

MUMBAI, June 12 (Reuters Breakingviews) - Foreign money managers are pouring into India to cater to the rising rich. Many of them may find success easier to come by than they did in neighbouring China.
The race kicked off in earnest this week when BlackRock (BLK.N), opens new tab won regulatory approval to launch a wealth business, within a month of securing a go-ahead for its mutual fund operations. The world's largest asset manager led by Larry Fink is back in the country after exiting a local joint venture in 2018. This time the U.S. firm is in partnership with Jio Financial Services (JIOF.NS), opens new tab, an upstart spun off from tycoon Mukesh Ambani's $227 billion Reliance Industries (RELI.NS), opens new tab.
Others present also are digging deeper to tap everyday savers. Armed with a new licence, HSBC (HSBA.L), opens new tab will push into 20 new cities in search of wealth clients. Its rival Standard Chartered (STAN.L), opens new tab is pivoting toward affluent clients and away from single product relationships. Meanwhile, Blackstone bought wealth services provider ASK Investment Managers in 2022, whose parent now plans to launch a mutual fund.
Underway is a dramatic shift in how Indians put money to work. Households' net financial wealth, after deducting liabilities, rose 249% to $3 trillion over the nearly 12 years to the end of March 2023, per researchers at the Reserve Bank of India. Bank deposits account for 43% of financial assets, down from 51% in March 2012.
In effect, households are moving deposits into riskier instruments. Pumped up by a high-voltage marketing campaign targeting mom-and-pop savers, the mutual fund industry's net assets under management stood at 72 trillion rupees ($845 billion) as of May, rising 22.5% year-on-year. Mutual funds' share of net financial savings was 8.4% at the end of March 2023, up from less than 1% a decade ago, per data from industry group Association of Mutual Funds in India and research firm Crisil Intelligence. And there's plenty of runway for growth; the industry counts just 3% of the population as customers.
Beyond everyday savers, the number of Indian ultra-high net worth individuals will increase to 19,908, a 50% increase during the five years to 2028, property consultancy Knight Frank reckons, faster than in any other geography. There's also rising interest from richer parts of the 35 million-strong Indian diaspora living to invest at home.
To be sure, by some measure India currently has just one twelfth of the investable wealth assets under management that China had in 2020. Ping An Asset Management alone shepherds funds nearly equivalent in value to those of the entire Indian asset management industry. Yet the smaller opportunity may be easier for Western financial firms hungry for growth to tap.
A sluggish economy, poor stock market returns, and geopolitical tensions dim the allure of China. Asset managers including Fidelity and Schroders have cut costs and scaled back expansion plans in the People's Republic. India not only saw GDP growth of 7.4% in the March quarter, but its stock market is booming too.
Unlike in China where equities have miserably failed to reflect decades of strong economic growth, Indian stocks are better correlated to GDP. Mutual fund investors in India are largely equity-oriented; in China, 68% of flows were into fixed income instruments in 2022, per Fitch Ratings.
Of course, local competition is formidable. There are 51 mutual fund houses, and the largest by assets under management are backed by Indian banks with a foreign partner: State Bank of India's (SBI.NS), opens new tab joint venture with France's Amundi (AMUN.PA), opens new tab leads, followed by ICICI Bank (ICBK.NS), opens new tab with Prudential (PRU.L), opens new tab.
What's new is the potential for digitisation to drive down high expenses. Thanks to a distributor-led model, the asset-weighted median expense ratio for equity funds, a measure of cost, was 1.78% in India, higher than 1.75% for China and 1.37% for Korea in 2022, data from Morningstar shows.
In partnering with Jio Financial, whose telecom affiliate counts 477 million subscribers, BlackRock probably sees an opportunity to scale up quickly and use technology to cut out the middleman. Only 41% of mutual funds' assets under management are sourced directly from investors, per AMFI and Crisil Intelligence, and the share is probably lower by number of accounts.
If executed well, the BlackRock-Jio duo will disrupt the status quo and eat into the business of homegrown technology-led brokers like Zerodha and the soon-to-go-public Groww, which sells one in every four 'systematic-investment plans' where individuals commit a fixed amount, usually monthly, to mutual funds. Both privately-owned companies might be worth up to $7 billion each. Singapore's StashAway, backed by Hamilton Lane and others, has secured over $1 billion in assets under management through digital sourcing within just four years of its launch in 2017.
Not everyone feels the prize is within reach. Some of the new strategic partnerships emerging look more like an exit. UBS (UBSG.S), opens new tab is acquiring 5% of Mumbai-listed $5 billion 360 One (ONEW.NS), opens new tab and is transferring the onshore wealth business it inherited through the acquisition of Credit Suisse to the Indian group. The Swiss bank closed its own Indian wealth business roughly a decade ago.
The India opportunity also has some hard-looking longer-term limits. The real value BlackRock might bring to the table for Indian investors probably rests in deploying their money offshore. That edge is dulled by capital controls; New Delhi imposes a $250,000 limit on sending money overseas. That looks more liberal than Beijing's long-standing limit of $50,000, but India has ramped up taxes on outbound remittances exceeding $11,700. For now, at least, there is plenty to do within India.
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