Gic Weighs Fund Arm Merger With Lic Mf

It is now the turn of state insurance companies to look at a merger in the mutual fund industry. General Insurance Corporation (GIC) is considering a proposal to merge its mutual fund unit -- GIC Mutual Fund -- with LIC Mutual Fund.

This follows GIC Mutual Fund reeling under the redemption pressure of meeting its commitment under the various closed -ended assured returns schemes, said officials. GIC has yet to seek board approval for the proposed merger.

LIC Mutual Fund board met today in Mumbai, but while rumours of a merger between the two funds is doing the rounds in the market, this was not discussed in the board meeting. "Nothing of the sort was discussed in the board meeting," said The Life Insurance Corporation of India's (LIC) chairman S B Mathur.

GIC Mutual Fund has investments to the tune of Rs 300 crore, under 10 schemes in both debt and equity. In contrast, LIC Mutual Fund is more than eight times larger, having assets under management to the tune of Rs 2,500 crore. The management at GIC feels that LIC is better placed in managing mutual fund schemes, especially as it would rather concentrate on its core competency in the field of insurance.

LIC Mutual Fund had in the past also been approached by SBI Mutual Fund for a similar merger, though no official move was taken. LIC Mutual Fund itself has been keen to induct foreign expertise, and was seeking a tie up with a foreign mutual fund entity for technical inputs. Talks however, fell through as the foreign entities wanted to take over control and call the shots. This was not agreeable to the management at LIC.

"We want to have a stronger entity through a merger," said LIC top officials.

GIC Mutual Fund on the other hand, is facing a problem with its US-based 40 per cent joint venture partner, SC Management, having informed that it will pull out of the business due to poor performance.

GIC is willing to take over SC Management's stake, but is keen to merge its mutual fund business with that of LIC Mutual Fund, as the latter has been able to manage its investment activities better.