MF officials bemoan Morgan Stanley exit

A fortnight after Morgan Stanley's exit from India's mutual fund (MF) business, sector insiders say it's unfortunate to see two big US-based asset management companies (AMCs) ending their operations here in the recent past.

Morgan Stanley, the first foreign fund house to enter India, shut its Indian asset management arm after two decades of existence. (And, in March 2012, Fidelity sold itself off to L&T MF). Fidelity exited Indian mutual fund business in March, 2012. On December 23, HDFC MF acquired all schemes of Morgan Stanley at an undisclosed amount. Sources estimate the deal size at Rs 100 crore, for an asset size of Rs 3,290 crore.

"I am not getting into the merit of their exit. But, it's rather sad to see Morgan Stanley going out of India," says the executive director (ED) of a large fund house. Though, from a business point of view, peers will take it as a competitor quitting the limited space of fund management, it is not good on the whole for either the sector or investors, he adds.

FOREIGN FUND HOUSES IN INDIA

• Morgan Stanley, the first foreign fund house to enter India, shut its Indian asset management arm after two decades of existence
• On December 23, HDFC MF acquired all schemes of Morgan Stanley at an undisclosed amount. Sources estimate the deal size at Rs 100 crore, for an asset size of Rs 3,290 crore
• Analysts say that though from a business point of view, peers will take it as a competitor quitting the limited space of fund management, it is not good on the whole for either the sector or investors
• India has seen several foreign entities entering as well. T Rowe Price, Schroders, Invesco and Nippon are prominent ones. However, all these acquired a sizeable chunk, 25-26 per cent, in Indian entities; they did not start on a standalone basis

Agrees an executive vice-president of another fund house: " Healthy conpetition is good for the sector; it sector benefits and there are also more options for investors."

According to the ED cited above, foreign funds bring innovation and different products to India. Investors get an opportunity to diversify. "More, in a country with 1.25 billion population, a 45-player industry is certainly not enough. In the US, which has a fourth of our population, there are around 800 AMCs," he states.

A top official in the sector said, "It does not matter whether I am present in a particular part of the country or not. If someone else is selling products there, it is good for the sector, especially when we have a pathetic penetration, with poor awareness about MFs."

He added if money gets concentrated towards a few fund managers, it could prove dangerous for investors if investment calls do not go well. More fund managers give a wider horizon of choice to investors, he added.

India has, however, seen several foreign entities entering as well. T Rowe Price, Schroders, Invesco and Nippon are prominent ones. However, all these acquired a sizable chunk, 25-26 per cent, in Indian entities; they did not start on a standalone basis.