Few people would be optimistic about seeing their assets under management fall from around $1.8 billion to $550 million in the space of six months. But the global financial crisis seems to be benefiting Benchmark Asset Management, India's sole boutique manager of exchange-traded funds.

The firm's investor base has tripled in the same time period, says Sanjiv Shah, president in Mumbai, who attributes the asset decline purely to declines in equity valuations.

Benchmark is not the only provider of ETFs in India. It competes with much bigger players such as Kotak Asset Management, Reliance Capital and UTI Asset Management. But it is the first to have begun distributing directly over the National Stock Exchange, which relieves it of the huge costs of distribution. Its Bees series has achieved first-mover advantages in terms of branding for ETFs. The range includes ETFs on the S&P/NSE's "Nifty 50" index; the Nifty Bees was the country's first ETF.

"It's hard for a sales guy at Reliance or UTI to sell an index fund without undermining active-management sales," Shah says. Citing the Satyam Computer fraud, he says the downtown has made it very difficult for bank or securities company distributors to recommend a particular security or a fund. Although these distributors don't sell Benchmark's ETFs, individual investors are becoming aware of the product via the NSE.

Equity ETFs remain a tough sell, however. Benchmark is making a marketing push for its gold ETF, which was launched in 2007. "People can now buy gold in paperless form," Shah says. This requires a change in mindset away from holding physical gold, but Shah hopes the crisis will convince more people to do so.

He says that annually, Indian investors consume 800 tonnes of gold, of which ETFs account for only 6 tonnes. Benchmark has 40% of that market share, which amounts to roughly $70 million.

The firm has also just launched an Islamic ETF covering domestic equities.

Benchmark hopes two new initiatives will see it through the crisis. It has applied to the Securities and Exchange Board of India for approval to launch the country's first fixed-income ETF. This will take positions in long-dated government bonds and no credit risk. Individuals in India are not permitted to buy government securities directly (although they can take exposure via a bond mutual fund), so this ETF will be the first product to provide it.

The firm has also applied to Sebi to introduce India's first international ETF, in this case covering Hong Kong's Hang Seng Index. Shah expects approvals to come over the next several months.

On the marketing side, Benchmark is releasing a book about ETFs with the local arm of broadcaster CNBC that it hopes will reach a large audience of individuals and brokers. Professional money managers, institutions and corporations have not been big users of ETFs, however, and they remain a retail tool.

Another challenge is liquidity, but paradoxically for a credit crisis, this appears to be improving. Benchmark relies on market makers, and the number of supporting brokers has risen to six in the past three months -- particularly as more investors seek to take positions via futures contracts on the Nifty 50.

"Brokers are no longer taking credit risk on a client and require a higher amount of collateral, and they're suggesting taking it in the form of Nifty Bees," Shah says.