Foreign partners also find the going tough.
When US-based T Rowe Price picked up stake in UTI Asset
Management in early 2010, the fund house was managing Rs 78,203 crore and was
the fourth-largest asset manager by assets. The fund house has since lost Rs 12,924
crore, or 16.5 per cent, of its assets. Today, it has been pushed to the fifth
slot on the assets under management (AUM) table.
Similar is the case with LIC Nomura Asset Management. It
lost over Rs 2,300 crore, or around a quarter of its assets, in the last three
months. As of September, the fund house’s average AUM stood at Rs 7,075 crore,
a fraction of the Rs 35,901 crore it had when.
Even as other state-owned fund houses such as Baroda
Pioneer, Canara Robeco and Union KBC which had inducted strategic foreign
partners, have grown since the entry of these global names, they have an AUM of
Rs 7,000 crore or less. In an industry with assets of Rs 7.13 trillion, this
accounts for a market share of less than a per cent. Canara Robeco MF has an
average AUM of Rs 6,920 crore.
Many foreign players who wanted to gain a foothold in the Rs
7.13-tn Indian asset management industry, preferred to partner with state-owned
players.
Foreign partners had shown interest in the fund houses
sponsored by state-owned banks due to their untapped distribution muscle. With
thousands of branches and significant reach beyond the metros, these were
ideally placed to take mutual funds to the masses. This vast network became
even more critical, when post 2009, Sebi rules made the agency distribution
model expensive and difficult. In the last four years alone, there have been
five such deals. However, none has resulted in spectacular success.
Canara Robeco MF has an average AUM of Rs 6,920 crore. In
March 2007, when Dutch major Robeco Groep NV picked up 49 per cent, the
officials said the firm would look at garnering a market share of five per cent
in five years.
Baroda Pioneer, where Italian company Pioneer investments
picked up 51 per cent in October 2007, manages Rs 3,398 crore. When the
investment was made, the fund house ranked 31 out of 32 fund houses. In the
latest listings, it stands at 29 among 42. The JV between Union Bank of India
and KBC Asset Management is relatively new and launched its first fund earlier
this year. It manages assets worth Rs 893 crore. The only exception to this
difficult state of affairs in cross-border marriages is that of State bank of
India, the country's largest lender, with French bank Societe Generale, which
has a 37 per cent stake. Seven years on, SBI Mutual fund continues to stay in
the Top 10 with a corpus of Rs 47,731 crore. Even this joint venture could not
live up to its objective of “being the second largest MF in four years”, as
stated by then SBI chairman AK Purwar.
A KPMG report on the mutual fund industry says, “Public
sector banks, with a large captive customer base, significant reach beyond the
top 20 cities in semi-urban and rural areas, and the potential to build retail
investor base, have played a very limited role in mutual funds distribution, so
far.”
Tapping the potential is easier said than done, note
experts. N Prasad, a former chief investment officer, says convincing the
person at the point of sale is a difficult task. “The multinational guys may
bring in the best chief of sales. He might be excellent in strategies. But, he
has to ultimately depend on the officer at the bank branch.”
Prasad says inertia at the point-of-sale level is a
difficult problem. “It is not just about incentivising, the person has to be
first convinced about what he is selling. This has become more difficult after
2008 and even the die-hard sellers are losing confidence in equities,” he adds.
Many foreign players flocked India, attracted by the equity
boom between 2003 and 2007, when the Sensex zoomed from the 3000-level to
20,000. Not many had counted for events following the collapse of Lehman
Brothers. The post-Lehman crisis has not only eroded equity valuations and
confidence in equity products, but also led to substantial regulatory changes
on the debt side as both the Reserve Bank of India and Sebi took measures to
prevent a repeat of the liquidity crunch. These measures have led to
substantial loss of assets for MFs as corporates and banks pulled out.
The Sensex closed little above at 16,500 today, the level it
had first crossed in September 2007— not a great advertisement for funds trying
to sell equity schemes as long term investment.
But, some private players that launched in the last few
years have managed to grow their assets despite lacklustre equity markets.
Religare Asset Management, which launched in 2008, has an AUM of Rs 11,042
crore, while Axis Mutual fund — it launched its first fund last year — already
has over Rs 7,500 crore in assets.
Source: http://www.business-standard.com/india/news/govt-mfs-gain-littleglobal-wedlock/452231/
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