It’s routine news for Indian Mutual Fund Industry’s stakeholder that there is “exit of XXXX foreign origin Mutual Fund from India”. The recent one in the list is Nomura. Nomura is planning to exit from its JV by offloading its stake and companies like GIC Housing others in race. Already Reliance Mutual Fund has acquired Goldman Sachs’ India mutual fund business.
Last year saw Birla SunLife acquiring ING Mutual Fund, Kotak MF buying out PineBridge Mutual Fund. Even Deutsche Bank & KBC are in exit talks with Premarica and Union Bank respectively. StanChart India AMC sold its business to IDFC in 2008, Fidelity sold its mutual fund to L&T Finance in 2012, and HDFC MF acquired Morgan Stanley’s fund business here in 2013. In the same year, SBI Mutual Fund bought Daiwa AMC.
This exodus made a curious case and deserves look in. Over the past 6-8 year the Securities and Exchange Board of India (SEBI) came out with a slew of reforms in order to drive more retail participation. Measures like banning entry loads, allowing fungible expenses for creating retail investor’s awareness, permitting higher expenses ratios, online trading platforms, introduction of Direct Plans with lower expense ratio etc. In addition to this, recently SEBI announced its intention to sell MFs through e commerce companies like Flipkart, Bankbazzar.com, etc.
To make it possible SEBI mulled an option of e-KYC. These regulatory changes not only investor friendly (largely) but also facilitated MF houses in terms cost of operations as well as product innovations. However, MF distributors seem to be not happy with all these measures. Another observation about foreign AMCs operating MFs in India is about their relatively smaller size in terms of Assets under Management. One can observe that size in terms of assets under management helps AMCs to get distribution muscle.
Those MF houses owned by banks do have captive distribution as well as captive customers. Probably foreign fund houses foresee their inability to expand and survive; took decision to exit from India. This phenomenon is surprising when India as a country is getting stronger FDI inflows. Again there is more surprise in store as SEBI will get a new chairperson in coming days
By Dr. Ramkrishna Dikkatwar
Associate professor Sinhgad Institute of management, Pune