Large-scale redemptions across schemes and strained finances in the past couple of months are forcing mutual funds in India to cut employee costs as part of their attempts to survive in testing times. While the smaller funds by assets under management (AUM), who are fighting for just survival, have already resorted to such measures, industry officials say it’s just a question of time before the larger ones follow suit, unless financial markets stabilise.
According to people familiar with the matter, Fidelity Mutual Fund and Edelweiss Asset Management Company have asked a few of their employees to leave the firms. Fidelity, with AUM worth Rs 6,484 crore as on October 31 that forms 1.5% of the Indian mutual fund industry’s total managed assets of Rs 431,901 crore, is believed to have laid off at least three officials in its research department.
In response to an ET query on this matter, a Fidelity spokesperson confirmed the development, saying: “In common with all financial services companies, we too are affected by falling and volatile stock market levels, adverse investor sentiment and the economic slowdown. This has meant that we have had to reduce our costs and adapt our business to the new environment.
We have been reviewing all our costs and having taken up opportunities to cut cost in all other areas, we have regrettably had to reduce staff costs as well. We can confirm that three analysts have been let go, however, our team of investment professionals remains one of the largest in the local market.”
According to people familiar with the matter, Fidelity Mutual Fund and Edelweiss Asset Management Company have asked a few of their employees to leave the firms. Fidelity, with AUM worth Rs 6,484 crore as on October 31 that forms 1.5% of the Indian mutual fund industry’s total managed assets of Rs 431,901 crore, is believed to have laid off at least three officials in its research department.
In response to an ET query on this matter, a Fidelity spokesperson confirmed the development, saying: “In common with all financial services companies, we too are affected by falling and volatile stock market levels, adverse investor sentiment and the economic slowdown. This has meant that we have had to reduce our costs and adapt our business to the new environment.
We have been reviewing all our costs and having taken up opportunities to cut cost in all other areas, we have regrettably had to reduce staff costs as well. We can confirm that three analysts have been let go, however, our team of investment professionals remains one of the largest in the local market.”
Edelweiss AMC, a new entrant to India’s competitive mutual fund industry, is also learnt to have opted this measure to trim costs. The entity, which managed assets worth Rs 228 crore as on October 31, has asked a few of its staff, including a top official in the institutional sales department, to resign.
An Edelweiss spokesperson responded to an ET query, saying: “As per regular process, performance reviews are conducted on a quarterly basis in order to maximise organisational culture & employee profile fit in keeping with the organisations’ overall goals and requirements. There have been no mass layoffs.”
Similarly, some of the other newcomers in the domestic mutual fund industry, including a couple that were criticised in the industry for their exorbitant marketing expenses at the time of their launch, are also looking at options to cut costs. Mirae Asset Global Investments India, which saw its assets fall by 56% in October, has cut salaries of its employees in its latest yearly review.
“We have rationalised salaries in line with the industry. This has been around 30% on an average,” said Mirae CEO Arindam Ghosh, adding that there have been no layoffs from the organisation, contrary to industry speculation that the fund has retrenched employees.
The situation is in stark contrast to the situation a few months ago when mutual funds were absorbing retrenchments in the financial services sector, mainly broking companies. But, with huge redemptions in most schemes in the past couple of months, amid a bear market in equities and tighter money supply situation, many firms in the industry have been left with little options. If business conditions deteriorate, jobs at larger mutual funds would also be in jeopardy, industry officials said.
“The situation is grim and even we would have to cut jobs to sustain ourselves,” said a top official at one of India’s top five mutual funds.
An Edelweiss spokesperson responded to an ET query, saying: “As per regular process, performance reviews are conducted on a quarterly basis in order to maximise organisational culture & employee profile fit in keeping with the organisations’ overall goals and requirements. There have been no mass layoffs.”
Similarly, some of the other newcomers in the domestic mutual fund industry, including a couple that were criticised in the industry for their exorbitant marketing expenses at the time of their launch, are also looking at options to cut costs. Mirae Asset Global Investments India, which saw its assets fall by 56% in October, has cut salaries of its employees in its latest yearly review.
“We have rationalised salaries in line with the industry. This has been around 30% on an average,” said Mirae CEO Arindam Ghosh, adding that there have been no layoffs from the organisation, contrary to industry speculation that the fund has retrenched employees.
The situation is in stark contrast to the situation a few months ago when mutual funds were absorbing retrenchments in the financial services sector, mainly broking companies. But, with huge redemptions in most schemes in the past couple of months, amid a bear market in equities and tighter money supply situation, many firms in the industry have been left with little options. If business conditions deteriorate, jobs at larger mutual funds would also be in jeopardy, industry officials said.
“The situation is grim and even we would have to cut jobs to sustain ourselves,” said a top official at one of India’s top five mutual funds.
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