Another Foreign Asset Manager exiting Competitive Indian Mutual Fund Industry

The Indian Mutual Fund and Asset Management Companies are  facing tough times and foreign asset managers are exiting in droves. Fidelity has put up  its $2 billion of funds on the auction block  trying to find a buyer as it exists India. This is only after a couple of months when Blackstone another of the trillion dollar asset managers existed the Indian business. In 2008 during the boom times, every Tom Dick and Harry of the asset management business wanted to get a piece of the Indian pie. The local brokerages were commanding super high valuations while growth and profits seemed endless.

However the Fairy Tale has ended with most MF companies reporting losses and declining revenues from higher competition . With Technology changing the face of the financial industry, its only the very nimble who have been making money .Others are trying to diversify into related areas to retain profitability. Fidelity one of the largest asset managers has a good presence in India but wants to exit. It has a technology services back end operation as well which it has been trying to sell for a long time. However in case of the MF it should have better luck given the size of the corpus . It is trying to get a 10% of the AUM as the sell price for its Indian business.

Indian Stock Brokers going Bankrupt

The Indian Stock Brokers have seen a very tough past couple of years after the Lehman crisis.Most of the larger listed Indian  investment banking companies have seen their valuation and stock prices keep touching all time lows.The reason is that competition has been fierce as a number of domestic and foreign brokerages entered the financial industry in 2008 during the boom.While the stock market volumes have gone down substantially the number of players fighting for a shrinking pie have  gone up.

While the larger stock brokers have seen reduced profits,the smaller ones have had to shut down or sell.This trend has been exacerbated last year with the rise of computer controlled algorithmic trading.Most of these small brokers which used arbitraging strategy to generate profits have seen their main business evaporate.Retail investors in India have also avoided the stock market which has become a corruption landmine.With even top institutions like GMO,Goldman becoming victims of frauds,individual investors have no chance.Also market operators have made the Indian stock market a pump and dump heaven even as SEBI takes a long time to crack down on the abuses.

Other reasons for the failure are

a) Decrease in cash volumes which decreases the brokerage

b) Securities transaction tax

c) Importance of Technology which requires higher investment

The Top Asset Management companies in India are:

1. UTI Asset Management Co. Ltd. – UTI Asset Management Co. Ltd. (UTIAMC) is a company incorporated under The Companies Act, 1956. It came into existence in 2002, as the Asset Management Company of the UTI Mutual Fund. The paid up capital of UTIAMC has been subscribed by four sponsors: State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank. UTIAMC, apart from managing the schemes of UTI Mutual Fund, also manages the schemes transferred/migrated from the erstwhile Unit Trust of India.
2. Reliance Capital Asset Management Ltd. –  It is one of India’s leading and amongst most valuable financial services companies in the private sector. Reliance Capital Asset Management Limited, a wholly owned subsidiary of Reliance Capital Limited, acts as the AMC to the Reliance Mutual fund. Reliance Capital has interests in asset management and mutual funds; life and general insurance; commercial finance; stock broking; investment banking; wealth management services; distribution of financial products; exchanges; private equity; asset reconstruction; proprietary investments and other activities in financial services. Reliance Capital has a net worth of Rs. 7,810 crore and total assets of Rs. 31,994 crore  as on March 31, 2011.
3. SBI Funds Management Pvt. Ltd. –  SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country. SBI Funds Management Pvt. Ltd. is a joint venture between ‘The State Bank of India’ and Société Générale Asset Management (France), one of the world’s leading fund management companies. SBI Funds management manages over Rs 38,782 crores of assets and has a diverse profile of investors making their investments. In 20 years of operation, the fund has launched 38 schemes with consistent returns.
4. HDFC Asset Management Co. Ltd. – was incorporated in 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI. In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.169 crore. The shareholding pattern is Housing Development Finance Corporation Limited 59.98%, Standard Life Investments Limited 39.99% & Other Shareholders 0.03%. The AMC also provides portfolio management / advisory services and activities are not in conflict with those of the Mutual Fund.
5. ICICI Prudential Asset Management Co. Ltd. – is a privately owned investment manager. ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank & Prudential Plc, one of the United Kingdom’s largest players in the financial services sectors. It manages separate client-focused equity, fixed income, and balanced mutual funds. As an Asset Management Company, the company has over 15 years of experience and are currently managing a comprehensive range of schemes of more than 46 Mutual funds and a wide range of PMS Products for its investors, spread across the country.
6. Franklin Templeton Asset Management (India) Pvt. Ltd. – Franklin Templeton which is one of the biggest Global Asset Managers has a major presence in India as well.It is one of the oldest players in the India.
7. Birla Sun Life Asset Management Co. Ltd. – is the investment manager of Birla Sun Life Mutual Fund. The Fund offers an array of savings and investment products for its individual, corporate and institutional investors and also manages two offshore funds. The fund house  had an average assets of over Rs.65,000 crore including offshore funds (as on 31 March 2010). It is  ranked amongst the top five asset management companies in the country.
8. Sundaram BNP Paribas Asset management Co. Ltd. –  is a privately owned investment manager, being a joint venture between Sundaram Finance and French bank BNP Paribas. It invests in the public equity and fixed income markets of India. The firm employs fundamental and quantitative analysis stock picking & in-house and external research to make its investments. The average assets under management was Rs. 12,827 crores as on March 31,2008.
9. TATA Asset Management Ltd. – The company’s principal activity is to act as investment manager to the Tata Mutual Fund. It has a client base of over 1 million people.  The company manages funds across the entire risk-return basis. These include equity funds, balanced funds and debt funds.
10. DSP BlackRock Investment Managers Pvt. Ltd.- DSP BlackRock Mutual Fund was set up as a Trust and the sponsors are DSP ADIKO Holdings Pvt. Ltd. & DSP HMK Holdings Pvt. Ltd. (collectively) and BlackRock Inc. DSP BlackRock Investment Managers Pvt. Ltd. is the investment manager to DSP BlackRock Mutual Fund.It invests in variety of equity related, fixed income & hybrid schemes.

Fidelity

Fidelity Investments Worldwide is in talks to sell its mutual fund business in India, a person with direct knowledge of the development said on condition of anonymity. Fidelity is seeking a valuation of Rs. 1000 crore for its asset management arm.
Fidelity started operations in India in 2004 and managed assets worth close to Rs. 9000 crore as of December 2011 according to data from the Association of Mutual Funds of India (AMFI).

Blackstone

The Blackstone Group, one of the largest private equity groups globally, is exiting its biggest India-focused close-ended mutual fund scheme: India Fund Inc.The company will transfer the management of the fund to Aberdeen Asset Management Asia. The deal awaits stockholders’ approval on November 16. Another scheme, the Asia Tigers Fund of $60 million, is also being sold to Aberdeen. Besides the change in management, the deal size was not disclosed.