Mutual fund sector sees four CEO exits in short span

At a time when investor inflow seems picking up; observers say going will remain tough for smaller entities

Just when things had started to look up, the mutual fund (MF) sector has witnessed top-level exits. In a few months, chief executive officers (CEOs) of four different fund houses have quit.

The chieftains to have pressed the exit button are Akshay Gupta of Peerless MF, Jaideep Bhattacharya of Baroda Pioneer MF, Nikhil Johri of BNP Paribas MF and Sandesh Kirkire of Kotak MF.

Three of these exits were in the past month, a time when the sector saw encouraging investor flows into the equity segment, on the back of a strong rally in the market.

Although there is no common link in these exits, experts note most of them were in small-size asset management companies. "The fund business has become challenging. It is increasingly proving hostile for the small AMCs. Given this backdrop, such churn isn't very surprising, " said Dhirendra Kumar, CEO, Value Research, a MF tracking firm.

The assets managed by Peerless and BNP Paribas are around Rs 3,500 crore. Baroda Pioneer manages a little over Rs 8,000 crore. Kotak MF is relatively bigger, with asset under management (AUM) of Rs 35,000 crore.

Kotak MF and BNP Paribas MF didn't reply to the query sent by Business Standard.

Gupta, who quit in March, has joined Indiabulls as group executive head of asset management, private equity and private wealth. It couldn't be established where the remaining three executives where headed.

Baroda Pioneer confirmed Bhattacharya's exit and said chief operating officer Kiran Deshpande and sales head Mahmood Basha were jointly heading the fund house at the moment. They are working closely with Jack Lin, chairman, Baroda Pioneer AMC.

Overall AUM of the domestic MF sector recently crossed Rs 10 lakh crore mark for the first time. "The movements look quite contrarian at a time when markets have improved and growing assets is relatively easier," said Raghvendra Nath, managing director at Ladderup Wealth Management.

Following the meltdown in the market in 2008, the fund management sector has seen a turbulent phase in these six years, especially on the equity side. Since May, when the new central government took charge, it has seen a revival of sorts, with fresh money pouring in. Last month, equity schemes, at over Rs 10,000 crore, saw their best inflows since January 2008.

The sector, however, has seen adverse changes in the the tax structure on the debt side in the Union Budget. The move, experts said, could impact smaller players, which largely lean on debt flows.

"The future of small AMCs is bleak. It's tough for them to grow at a time when assets are being garnered by bigger players. Smaller fund houses need to create niches to attract assets. Else, the going looks difficult," said Niranjan Risbood, director (fund research) at Morningstar India.

Currently, around 80 per cent of the sector's combined AUM are concentrated with the top 10 entities, leaving little on the table for the remaining 35 operators.

Pressure from sponsors to mobilise assets, increase market share and profitability is immense. There has also been talk of disagreements between the chiefs and sponsors at a lot of fund houses in the past over such issues.