MFs try to quell investor fears

Following Religare’s acquisition of Lotus India asset management company (AMC), other AMCs are going that extra mile to gain confidence of the investing public.

Yesterday, the Principal PNB AMC issued a statement reinforcing its confidence in its India business. “Principal remains committed to its business in India and Principal PNB asset management fits well into the Principal Financial Group’s core strategy, which is to be a global asset accumulation and asset management company,” said Rajan Ghotgalkar, country head of Principal India.

There have been reports Principal is in talks with Birla Sun Life AMC to sell its mutual fund operations. The fund house expects the announcement will quell rumours about its operations.

Mirae India AMC, another company, which has been in the news for all the wrong reasons, has been reaching out to the media as well as distributors. However, distributors said it is the bigger AMCs that have been reaching out to them.

“Smaller AMCs have chosen to keep mum because they have been badly hit in the redemption wave that the industry saw in September-October,” said a distributor.

In fact, last week, Arindam Ghosh, chief executive officer of Mirae Asset, said, “The organisation in India is at its infancy and going forward, we are looking at stable and profitable growth. In alignment with our global business, our focus would clearly be on equity as an asset class with fixed income being more of an asset allocation strategy. Ideally, we would like to have at least 70 per cent of our assets biased towards equity.”

Mirae Asset also faced a slew of redemption requests during the liquidity crunch. Ghosh also clarified that Mirae Asset’s mutual fund operations in India are not up for sale.

In such times, when the financial industry is facing skepticism and there is a general lack of confidence, communication has become the most important tool for financial services providers. This is not a new practice for the fund management industry as mutual funds had sent out mailers and letters immediately after the Lehman Brothers Holdings collapse. In September 2008, Reliance Mutual Fund, had issued a note to its PMS clients because it held debentures issued by Merrill Lynch. The letter explained that debentures are not under any threat from Merrill’s takeover.

However, employees of the AMCs concerned have had no such luck. For instance, employees of Lotus India AMC were the last to know of the deal the promoters struck with Religare.