Introducing Direct Mutual Fund Investing on smallcase

Over the past few years, mutual fund distribution in India has evolved rapidly, shifting towards greater transparency and investor choice. Following this trend, we’re thrilled to announce that our Execution Only Platforms (EOPs) for direct investing in Mutual Funds is now live and fully operational. This marks a significant milestone in our mission to empower investors with a seamless, efficient, and transparent way to manage their investments. With this launch, smallcase has become one of the very few players in the industry to operationalise Execution Only Platforms for MF investments. 

But What Does This Mean for the Mutual Fund Ecosystem, and Why Does it Matter?

For decades, mutual fund investing in India revolved around distributors and offline channels. Investors typically purchased funds through agents, who earned commissions embedded in the expense ratio of the schemes, known as Regular Plans. This model served many investors well, but came at a cost: higher fees and often, advice driven by commissions rather than investor interests.

In 2012, SEBI took a major step to empower investors and reduce costs. It mandated that all mutual funds offer Direct Plans, the same schemes, managed by the same fund managers, but without distributor commissions. For investors comfortable making their own decisions, Direct Plans meant lower costs and potentially higher returns. Over time, Direct Plans grew rapidly, reaching nearly half of the industry’s total assets under management by 2022.

Yet while Direct Plans were a regulatory breakthrough, the infrastructure for accessing them was still fragmented. Investors could:

• Go directly to each AMC’s website or office,
• Or rely on technology-driven intermediaries, digital platforms offering convenience, aggregation, and user-friendly interfaces.

It was these digital platforms that sparked the next wave of transformation. As smartphones and digital literacy spread, millions of investors turned to apps and online platforms for managing their mutual fund investments. However, many of these platforms were built by investment advisers and stock brokers whose core licenses weren’t designed purely for “execution-only” mutual fund services. Because of this:

• Investors who wanted only execution services (without advisory or broking) still had to accept agreements and disclosures designed for advisory or brokerage relationships.
• Businesses that wanted to offer only mutual fund Execution Services were required to take unrelated licenses like advisory and broking  and follow the regulations applicable on these licenses/registrations

To address the above concerns, in January 2023, SEBI introduced a dedicated regulatory framework for apps/businesses, other than AMCs, offering direct mutual fund investing to their users – Execution Only Platforms (EOPs). The framework sought to:

• Clearly separate mutual fund execution services from advisory or brokerage functions.
• Standardise how platforms integrate with AMCs and RTAs, ensuring consistency and security in transaction processing.
• Enhance investor protection, privacy, and grievance redressal mechanisms.

Today, with the EOP framework in place, digital platforms like smallcase can operate as pure execution providers, transparent, regulated, and fully integrated with industry systems. For investors, it means easier access, lower costs, and greater peace of mind in an increasingly digital investment landscape.

Inside smallcase’s EOP

A key differentiator of our EOP setup is our deep integration with 35+ AMCs and the leading RTAs in India: CAMS, KFIN & MFU. Rather than relying on third-party aggregators or manual processes, we have built direct technical connections to these systems.

This infrastructure makes mutual fund investing on smallcase fundamentally faster, more accurate, and more transparent. It allows us to:

• Fast processing of transactions: Purchases, redemptions, and switches are handled almost instantly, ensuring investors capture the prevailing Net Asset Value (NAV).
• Maintain precise records: Portfolio holdings, transaction histories, and investor details remain accurate and always reflect the latest status because they sync directly with RTA data.
• Eliminate manual errors: Automation reduces the risk of human mistakes and streamlines reconciliation processes across thousands of transactions.
• Enhance non-financial servicing: Changes such as updating bank details or contact information are seamlessly processed through our integrations, providing a truly comprehensive service experience.

This RTA connectivity forms the backbone of our mutual fund infrastructure under the EOP framework. It positions smallcase to deliver a fast, seamless and efficient investing experience.

What’s in It for Investors?

• Avoid Platform Lock-in, Get Benefits of SOA Holdings

Mutual fund investments can be held in two ways: in a Demat account or in a Statement of Account (SOA) format. Platforms offering Demat-based mutual funds often tie your investments to their ecosystem. Once your funds sit in Demat form, you can only redeem or manage them via that specific broker, and you may also face account opening fees or annual maintenance charges. 

In contrast, smallcase’s EOP uses the SOA format, which keeps your mutual fund holdings flexible and portable. You’re free to import and manage existing mutual fund portfolios on smallcase, and if you ever invest via smallcase, you can still access or redeem those investments directly through the fund house or any other EOP in the future. Plus, SOA-based holdings have no maintenance fees to hold over time. That means more freedom and lower ongoing costs.

• Lower Costs, More of Your Returns Kept

Regular mutual fund plans embed commissions paid to distributors, silently eating into your returns over the years. Direct plans eliminate those commissions, letting you keep more of what you earn. EOPs are purpose-built to give you easy, convenient access to direct plans, without the hidden costs tied to traditional channels. More return on the same investment, simply because you pay fewer fees.

• True Execution Only Means Freedom & Clarity

Earlier, even if you wanted only execution services like placing orders or tracking investments, you often had to sign agreements designed for advisory or broking. Now, with SEBI’s EOP framework, you can access pure execution services without being locked into unnecessary advisory relationships or paying for services you don’t want.

• Speed & Accuracy of Transactions

smallcase’s direct integrations with RTAs mean your mutual fund transactions happen faster, with purchases, redemptions, and updates flowing directly between you and fund houses, reducing delays and errors that can occur in layered setups. This ensures you see real-time, precise information about your investments. 

What’s Next for Mutual Funds on smallcase?

Bringing our EOP live is only the beginning.

Our next step is the launch of mutual fund model portfolios, where we’ll bring the same research-driven, thematic approach that has defined smallcase’s equity investing experience into the mutual fund domain.

These model portfolios will help investors:

• Access research-backed mutual fund portfolios created by SEBI-registered research analysts and investment managers
• Build diversified mutual fund baskets aligned to specific goals or themes
• Invest in a few clicks across various mutual fund schemes 
• Track performance, risk metrics and other ratios at a basket level 

Our vision is to help investors move from choosing individual schemes to investing in thoughtfully curated portfolios designed by regulated entities.