Fidelity MF eyes India re-entry

Top management of global asset manager recently visited, to decide course of action, only 3 years after selling its business here

The Rs 12 lakh-crore Indian mutual fund (MF) sector is likely to witness a key trend reversal. After a spate of exits by foreign fund houses in recent years, Fidelity Investments, a global asset manager, is looking to re-enter the segment here.

The US-based fund house had exited India three years earlier, selling its MF business to L&T Finance. Fidelity had assets under management (AUM) of Rs 8,800 crore, mostly equity, at the time.

According to sources, the top management of Fidelity was in India to prepare a re-entry plan. It is also learnt that Fidelity met several of its previous employees, here and in Bengaluru. The deal between Fidelity and L&T Finance included a three year non-compete clause, said sources.

FIDELITY'S JOURNEY IN INDIA

• 2004 Fidelity opens its first Indian office in Mumbai
• 2005 Launches maiden fund, Fidelity Equity Fund
• 2008 Launches online transacting service, Fidelity Online (www.fidelity.co.in)
• 2011 Assets under management reaches Rs 8796 crore
• 2012 Sold to L&T Finance Holdings and merged with L&T MF

Source: Website archives from original company website, media reports

A Fidelity spokesperson declined to comment on a query sent by this paper.

Following a change of guard at Fidelity in the US, the company has been observed to have got aggressive with its expansion plans. In October, Abigail Johnson (known as Abby) replaced her father, Edward Ned Johnson III, as chief executive officer (CEO) of Fidelity. According to Forbes magazine, Abigail is the sixth-richest woman in America and arguably the most powerful one in finance.

Fidelity recently re-entered the Australian market and observers say it plans a similar move in India.

People in the know said Abby was unhappy at not having a presence in India, one of the fastest-growing economies in the world. It is also learnt the top executive who took a final call to exit India was given marching orders earlier this year.

If Fidelity re-enters the AMC business in India, it will be first foreign one to do so. Fidelity is the second-largest MF company in America, after Vanguard. It was also a dominant player in the Indian market before quitting.

According to Dhirendra Kumar, CEO of fund tracking firm Value Research, “If such a large AMC changes its mind and re-enters, it is a positive for the Indian MF industry, which has been seeing a continuous outgoing of AMCs. This shows there are compelling reasons to do business in India.”

“Fidelity should have stayed back, as it was profitable enough and had good quality equity assets, with a loyal customer base. Had it stayed, its assets would have nearly doubled,” said a sectoral CEO.

Sources said the prime reason, other than its high-cost structure, which made Fidelity exit was regulatory pressure for shifting its trading desk from Hong Kong to India. Fidelity, it is learnt, was opposed to this, fearing various other local issues. However, experts said the market regulator should not have any problem now even if the trading desk is based out of India.

“There could be two ways Fidelity can explore (to get back). Either go for a fresh licence, which will take longer time, or acquire an existing AMC to make a quick entry,” said a sector official. The latter looks easier, as there are ample buying opportunities in the market, say those in the sector.