Fund Fulcrum

India may have recently entered the elite club of trillion dollar economies, and companies here may have metamorphosed from frogs in the well to global predators, but at $88-billion worth of assets under management as against $21.8 trillion worldwide, India's mutual fund industry ranks a measely 24th in the world. This is not to say that the funds industry in India, a miniscule contributor to the world total, is not growing in terms of size and potential. It sure is, a fact reflected in the latest AUM (assets under management) tally released by the Association of Mutual Funds in India.

The mutual fund industry closed September 2007 with Rs 4.77 lakh crore of AUM, an increase of 2.15% compared with August 2007. Assets under management by mutual funds have remained flat for September, despite the BSE Sensex rising by around 13% during the month. The September pattern is cyclical in nature as it is nearing the half-year corporate results season when banks redeem their funds. Moreover, companies have to go in for advance tax as the half-year ends. Reliance Mutual Fund continued its run as the largest fund house with Rs 70440.57 crore of AUM in September 2007 followed by ICICI Prudential Mutual Fund at Rs 50369.93 crore. Occupying the third and fourth slots, the AUM of UTI Mutual Fund and HDFC Mutual Fund were Rs 45002.62 crore and Rs 41333.4 crore, respectively.

Piquant parade

The trickle of private equity money into the country’s infrastructure sector is now turning into a deluge, with a slew of billion-dollar funds dedicated to core sector financing on the anvil. Australia’s Macquarie Bank Group and the International Finance Corporation are slated to jointly launch a $1-billion ‘Macquarie India Infrastructure Opportunities Fund’, while Power Finance Corporation’s $1-billion ‘India Power Fund’ and the UK-based 3i Plc’s $1-billion ‘3i India Infrastructure Fund’ are among the dedicated core sector funds on the horizon.

Mirae Asset Global Investments (India) is being set up as a 100% Foreign AMC of Mirae Asset, one of South Korea’s largest mutual fund managers, and would be investing $50 million in India over a three-year period to set up its Indian arm for asset management.

About five years after it ended operations in India, Pioneer Investments has tied up with Bank of Baroda for asset management. The group, which has presence in 25 countries, will take 51 per cent in Bank of Baroda’s existing asset management company. Pioneer’s domain knowledge and technical expertise makes an enriching combination with the widespread branch network of the bank. The bank would continue to sell products of other asset management companies through its branches.

Corporation Bank has announced a strategic partnership for distribution of Birla Sun Life’s Mutual Fund products and Bank of Baroda for Franklin Templeton and Sundaram BNP Paribas Mutual Fund products.

South Africa’s largest insurer Old Mutual, which manages £263 billion in assets worldwide, will soon enter into a tie-up with Kotak Mahindra Mutual Fund.

India's second largest private sector lender Housing Development Finance Corporation (HDFC) has acquired an additional 10 per cent stake in HDFC Asset Management Company from Standard Life Investments Ltd - the investment arm of the UK-based Standard Life Plc taking its holding to 60%.

Rana Talwar’s Sabre Capital, backed by private equity giant Temasek, is in talks with Cholamandalam DBS Finance to take over the latter’s mutual fund company — DBS Cholamandalam Asset Management. A few other strategic investors are also believed to be in the fray. The fund’s AUM had dropped from over Rs 5,000 crore in July 2007 to around Rs 3,829 crore in September. If Sabre and Temasek succeed in the acquisition, they will merge the AMC with Lotus.

Reliance Mutual Fund concluded a pact with the world`s third largest risk management service provider - MSCI Barra, to offer services across all its funds.This alliance will help Reliance Mutual Fund to access MSCI emerging markets module that includes MSCI India Index, the common benchmark used by non-Indian investors looking to allocate money to Indian equity investments.

SBI and UTI Mutual Fund have bagged the lion's share of the pension-fund kitty. They, alongwith LIC, have been named fund managers for the new pension system and the National Investment Fund. Of the Rs 1,000 crore under the National Investment Fund, UTI MF will manage 60%, SBI 30% and LIC 10%. On the other hand, of the Rs 2,000 crore under the new pension scheme, SBI will manage 55% , UTI MF 40% and LIC 5%.

Post-rebranding, Axis Bank (formerly UTI Bank) is now getting ready to enter the mutual fund and trusteeship business. The third-largest private bank had earlier looked at the option of taking over UTI asset management company.

UTI AMC expects an increased focus on retail investors to help it regain the top slot in the industry. The fund house, which plans an initial public offering by March next year, manages more than 8.5 million accounts worth about 450 billion rupees in assets.

To be continued…