Local fund houses are expanding their fund management and advisory businesses to overseas destinations to boost profits and to expand their asset base. Encouraged by a good investor response to Indian assets — especially equities and realty — leading fund houses are now in the process of opening branch offices in tony addresses world-wide, according to fund managers.
Top fund houses, such as Reliance Mutual Fund, ICICI Prudential Mutual Fund, Birla Sunlife Mutual Fund, HDFC and UTI, have plans to open offices in the UK, the US, Singapore, Japan and the Gulf. Most fund houses are now selling their offshore products through foreign distributors by paying huge commissions. Domestic funds are setting up overseas branches to establish a “better connect” with investors in those countries. They are trying to position themselves from being plain investment advisors to foreign investment banks to offshore fund managers.
“Having permanent establishments in foreign countries — from where you raise money — reflect your long-term commitment towards investors in those countries,” said Sundeep Sikka, CEO, Reliance Mutual Fund, which has subsidiary offices in Malaysia, Singapore, the UK, Dubai and Mauritius.
According to Mr Sikka, Indian fund houses are getting a significant amount of money from overseas investors. “Foreign investors are showing a good interest in Indian shares. Foreign investors are warming up to the idea of having an onshore fund manager to manage their investments in emerging markets, including India,” he said.
ICICI Pru MF and Birla Sunlife Mutual are also looking at options to start businesses in top cities. The aim of these funds is not to attract NRIs, but to service foreign investors. Kotak MF already has offices in London, New York and Dubai, while UTI Mutual Fund has offices in a few capitals in Europe, including London. Kotak MF and Birla Sunlife are managing a few India-focused funds from these destinations. According to fund managers, HDFC Mutual Fund is also looking to set up offices in the Gulf, after it received the mandate to advise Abu Dhabi Investment Authority (ADIA) on India investments.
“Selling mutual funds is becoming very difficult in India. The regulator has scalped our profit margins by a good measure; we are left with no option, but to approach overseas investors. We help these investors invest in Indian equities and real estate,” said the chief investment officer (CIO) of a bank-promoted fund house who spoke on the condition of anonymity.
According to the CIO, even foreign tie-ups are not helping Indian fund houses raise money from overseas investors. “Foreign partners don’t pass their clients to us... this is forcing us to seek our own clients in overseas markets,” the CIO added.
Managing foreign investors’ money is a high-margin business for most asset management companies. Depending on fund performance, foreign investors are charged anywhere between 2.5% and 4% as asset management charges by domestic fund houses. Investment advisory business yields just about 1-1.5% as advisor fees. Apart from funds, subsidiary (branch) offices also sell private equity and PMS products (after getting regulatory approvals) in foreign markets.
Local fund houses are now expecting large inflows into their offshore funds over the next few months. India-focused funds have managed superb returns over the past one year, making it very popular among foreign investors. About 75 India-dedicated offshore funds beat the Sensex, which gained about 17% in one year. About 37 funds returned more than 25% — the average category returns posted by domestic equity funds.
Source: http://economictimes.indiatimes.com/Personal-Finance/Fund-houses-set-sail-for-tony-global-addresses/articleshow/6527692.cms
Top fund houses, such as Reliance Mutual Fund, ICICI Prudential Mutual Fund, Birla Sunlife Mutual Fund, HDFC and UTI, have plans to open offices in the UK, the US, Singapore, Japan and the Gulf. Most fund houses are now selling their offshore products through foreign distributors by paying huge commissions. Domestic funds are setting up overseas branches to establish a “better connect” with investors in those countries. They are trying to position themselves from being plain investment advisors to foreign investment banks to offshore fund managers.
“Having permanent establishments in foreign countries — from where you raise money — reflect your long-term commitment towards investors in those countries,” said Sundeep Sikka, CEO, Reliance Mutual Fund, which has subsidiary offices in Malaysia, Singapore, the UK, Dubai and Mauritius.
According to Mr Sikka, Indian fund houses are getting a significant amount of money from overseas investors. “Foreign investors are showing a good interest in Indian shares. Foreign investors are warming up to the idea of having an onshore fund manager to manage their investments in emerging markets, including India,” he said.
ICICI Pru MF and Birla Sunlife Mutual are also looking at options to start businesses in top cities. The aim of these funds is not to attract NRIs, but to service foreign investors. Kotak MF already has offices in London, New York and Dubai, while UTI Mutual Fund has offices in a few capitals in Europe, including London. Kotak MF and Birla Sunlife are managing a few India-focused funds from these destinations. According to fund managers, HDFC Mutual Fund is also looking to set up offices in the Gulf, after it received the mandate to advise Abu Dhabi Investment Authority (ADIA) on India investments.
“Selling mutual funds is becoming very difficult in India. The regulator has scalped our profit margins by a good measure; we are left with no option, but to approach overseas investors. We help these investors invest in Indian equities and real estate,” said the chief investment officer (CIO) of a bank-promoted fund house who spoke on the condition of anonymity.
According to the CIO, even foreign tie-ups are not helping Indian fund houses raise money from overseas investors. “Foreign partners don’t pass their clients to us... this is forcing us to seek our own clients in overseas markets,” the CIO added.
Managing foreign investors’ money is a high-margin business for most asset management companies. Depending on fund performance, foreign investors are charged anywhere between 2.5% and 4% as asset management charges by domestic fund houses. Investment advisory business yields just about 1-1.5% as advisor fees. Apart from funds, subsidiary (branch) offices also sell private equity and PMS products (after getting regulatory approvals) in foreign markets.
Local fund houses are now expecting large inflows into their offshore funds over the next few months. India-focused funds have managed superb returns over the past one year, making it very popular among foreign investors. About 75 India-dedicated offshore funds beat the Sensex, which gained about 17% in one year. About 37 funds returned more than 25% — the average category returns posted by domestic equity funds.
Source: http://economictimes.indiatimes.com/Personal-Finance/Fund-houses-set-sail-for-tony-global-addresses/articleshow/6527692.cms
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