Pinebridge buys AIG’s India mutual fund business

American International Group (AIG) has entered into a purchase-sale agreement with Pinebridge Investments, a global asset management company, for the sale of its Indian mutual fund business.

The mutual fund would be taken over after regulatory approvals, according to two people familiar with the matter.

The agreement to sell AIG’s Indian mutual fund business to Pinebridge was finally entered into in the last week of October, though it was not made public at the time.

Details on the valuation could not be ascertained, but sources said since the deal is part of an announced global sale, it is unlikely to have been negotiated separately.

Sunil Mehta, the country head and chief executive officer of AIG India, declined to comment.

A purchase-sale agreement is a document that announces the intention of a buyer and seller to enter into a transaction.

At the peak of the financial crises in late 2008, AIG sold a number of its subsidiaries. Among them was its global asset management business, which was renamed Pinebridge Investments, a name that is said to have been partly derived from the address of the global headquarters of AIG at 70, Pine Street, New York.

Pacific Century Group (PCG), a private investment firm owned by Richard Li, the son of Hong Kong tycoon and chairman of Hutchison Whampoa Li Ka-shing, bought Pinebridge from AIG in March this year.

Under the then agreement, Pinebridge took over AIG’s asset management business under the Pinebridge brand in over 30 countries.

Regulatory issues associated with the structure of AIG’s India business is said to have resulted in the decision to sell the India business separately and at a later point of time.

Currently, Pinebridge companies provide investment advice and market asset management products and services. It has $83 billion(around `3.8 lakh crore) in assets under management as of September 2010 and is present in 32 countries.

Its emerging markets portfolio is worth $12.4 billion(around `57,000 crore) and in addition it also manages $4.2 billion (around `19,000 crore) through its hedge fund solutions business.
Pinebridge, which was founded in 1993, is an Asia-based private investment group with interests in infrastructure, property and other investments mainly in the Asia-Pacific region.

AIG Investments had `1,020 crore of assets under management as of September 2010, the latest available data.

The company, which employs around 60 people, has nearly 40% of its portfolio in equities.

This is a higher allocation than the rest of the industry, which manages assets worth `6.57 lakh crore of which 32% consists of equity assets.

Equity assets are considered to be more profitable than debt assets, according to industry experts.

In recent stake sales by asset management companies, valuations have been in low single digits as a percentage of assets under management.

According to media reports, DBS Cholamandalam was acquired by L&T Finance for Rs45 crore in September 2009 at 1.5% of its nearly Rs3,000 crore in assets under management at the time.
LIC mutual fund entered into an agreement to sell 35% of its stake to Nomura Asset Management Company of Japan in July 2009 valuing the mutual fund at Rs880 crore or 2.7% of its assets under management at the time.

Source: http://www.dnaindia.com/money/report_pinebridge-buys-aig-s-india-mutual-fund-business_1474729

Who will regulate the regulator?

While the expose of the Radia tapes is the best thing that has happened in India for governance — ever — the windfall raises some fundamental issues about government regulation and diktat: who is there to check on the regulator? What if she, or it, displays inconsistent or irrational behaviour — who is there to say that this is not how it should be, this is not how it was meant to be.Some examples of where the regulator has clearly overreached are provided below. Let us start with the Radia case. What was wrong here? She was suspected of income tax evasion, her phone was tapped, some interesting conversations emerged, and some corrupt practices uncovered. So far, all goody-good. Except a major problem — what right did the Indian government have, or for that matter any government, to tap an individual’s phone on the mere pretext of suspicion of income tax evasion? The government will argue, and correctly, that tax evasion is a criminal offence. But given the way our system works, or any country, do we want to give tax administrators the authority to tap our phones? If so, we might as well give the authority to such political outfits as the Criminal Bureau of Investigation.It is instructive to learn about practices in Western democracies with regard to wire-tapping. (Comparisons with non-mature democracies will lead to unfair similarities with banana republics). In the US, evidence obtained via wire-tapping is not admissible in the courts. This is most likely the reason why some very smart individuals were “casual” about their conversations with Raj Rajaratnam of Galleon. It is alleged that Rajaratnam, along with his colleagues/friends, was indulging in trading on the basis of insider information. The evidence for this was obtained from wire-taps. The question remains — how could these very smart individuals get caught so easily? Most likely, they all believed (including Rajaratnam) that any evidence of their tapped conversation could not be used as evidence so they could talk freely. But the phone was tapped — after heightened anti-terrorist concerns following 9/11, on the suspicion that Rajaratnam was allegedly funding the LTTE.In order to wire-tap, the government in the US has to go to a federal judge and obtain permission. And this permission is granted only in rare cases and when there is threat to life and public security. A simple and easily manufactured allegation of income tax evasion just does not cut any ice. Either in the US or in any halfway decent civilised society. So why isn’t our civil society and/or industrialists protesting the arbitrary and extreme powers that the Indian state is able to manufacture at will? We are protesting that our privacy was violated, but not the instruments that made such intrusion possible?There are many other instances of government and politicians (besides the daily offerings of new corruption and scams) playing short and dirty with individual enterprise and freedom. Take the microfinance “problem”. Microfinance has justifiably grown into a major capitalist enterprise. And like all good capitalist enterprises, it helps the poor. Till date, there have been several million microfinance borrowers in India, mostly women. They have borrowed money at interest rates upwards of 24 per cent. The founder of microfinance, Mohammed Younus of Bangladesh, provides loans at 20 per cent, but he, a Nobel prize winner for introducing microfinance, is able to do so because of state subsidies for such a practice (not unlike our own priority lending — only in Younus’s case, the subsidy does reach the poor!).There was a recent and very successful microfinance IPO in India, which unfortunately, but not unpredictably, led to the proverbial kiss-of-death. Intellectuals, and bureaucrats and politicians — the same kind that allow wire-tapping for as “cheap” and widespread an offence as income tax evasion (remember that for legal purposes an income tax offence is the same as have you ever cheated on your spouse?!) It is alleged by the so-called do-gooder politicians that microfinance is bad because it allows people to profit on the backs of the poor — before you know it, they will claim that microfinance is bad because it allows for the sexual exploitation of poor women. And before you can say wait a minute, there will be the former Interior Secretary of Pakistan, Tasneem M. Noorani, claiming that microfinance exploits the poor because India has never allowed a plebiscite in Kashmir.Then there is the case of the Indian securities market regulator Sebi committing one wrong because it is intellectually, or mindlessly, wedded to another wrong. Sebi regulations allowed mutual funds to charge an expansive 2.5 per cent annual expense fee for their products, even for index linked funds. As contrast, index-linked funds in the US charge about 0.1 per cent, and other funds charge what the market can bear. So why can’t mutual funds charge whatever they can charge? And when we bring about that improvement, why not introduce the simple requirement that mutual funds, and banks, openly declare what the expense charges are on each application for a mutual fund, or loan?Yet another example. A government-supported, (and initially sponsored) stock exchange NSE has grown into a fat monopoly — a monopoly which has been allowed to exist by the asleep-at-the-wheel regulator, Sebi. But there are pressures for reform — so Sebi is forced to appoint a committee to look into the matter. The committee was headed by the finest and most reform-oriented central bank governor of India — Bimal Jalan. It recommended that the problem of a monopoly be solved not by allowing competition, but by killing it; nationalise NSE, it says, and pay its managers public sector wages. In 2010, it does not get more weird. Which is why I believe that the Jalan recommendations are a very clever ploy to rid NSE of its monopoly status — make a so out-of-left-field box recommendation that is so bizarre that everybody will be forced to arrive at the correct solution: allow stock exchange competition, by allowing more than one stock exchange to operate. And require the exchanges to be listed, so that everyone can have a chance of owning a regulator inspired monopoly. That is how you regulate the regulator.

Source: http://www.indianexpress.com/news/who-will-regulate-the-regulator/723256/0