The fall & fall of LIC Mutual fund

Corpus dips 80 per cent from the peak level to Rs 9,338 crore, the lowest since April 2007.

Only 18 months ago, it was the sixth largest fund house, with a corpus of Rs 51,501 crore. Today, LIC Nomura Mutual Fund has lost 80 per cent of this sum and fallen to 16th rank on the list of fund houses, according to the latest figures of the Association of Mutual Funds in India.

Even as MFs begin to see inflows into both debt and equity funds, LIC Nomura continues to lose assets. It lost Rs 2,000 crore in assets this quarter, too, falling below Rs 10,000 crore for the first time since April 2007. In the past year, it lost Rs 20,000 crore, or two-thirds of its asset base.
 

SHRINKING CORPUS (Rs crore)
Fund house	December  2009	AUM rank	June 2011	AUM rank	change
Reliance	1,19, 981	1	1,01,259	1	-15%
HDFC	97,183	2	92,032	2	-5.30%
ICICI Prudential	82,432	3	79,758	3	-3.24%
UTI	78,203	4	69,105	4	-11.60%
Birla Sun Life	68,066	5	67,475	5	-0.86%
LIC MF	51,501	6	9,338	16	-82%
Source: Amfi

N Mohanraj, CEO of LIC MF, declined comment. An email questionnaire to him and Rabir Dutt, chief marketing officer, was unanswered. Mohanraj replaced Sushobhan Sarkar last year, after the company booked losses. A number of new faces have come in, some fresh from business school training. Nomura, which took 35 per cent stake in the fund house last year, has also inducted some senior people in the equities side. Ei-Ichi Oka is now chief investment officer, equity. However, the induction of a new investment team and international expertise from Nomura is yet to bear fruit. “A new team has come in and people are just settling in. It will be some time before things begin to move,” said an official from the fund house.

PEERS FAR BETTER
Dhirendra Kumar, CEO, Value Research, a Delhi-based MF tracker, says the fund house is in a drip mode. “LIC MF had a lot of assets in liquid funds. A couple of directives by RBI (the central bank) and Sebi (sector regulator) has led to heavy outflows of funds. That, combined with the changes in management, has caused the fall.” Liquid fund assets account for 40 per cent of the shrinking corpus.

However, while many of LIC Nomura’s competititors such as HDFC MF and ICICI Prudential MF also had seen a substantial outflow in liquid funds due to these rules, they have not seen such a huge fall in corpus. HDFC’s corpus fell from Rs 97,183 crore to Rs 92,032 crore, a fall of of around five per cent. ICICI Prudential MF saw assets drop from Rs 82 000-odd crore to Rs 79,000-odd crore.

Kumar says while most other MFs have been able to bring in money through launch of fixed maturity plans (FMPs), LIC has been largely missing in this space. While other fund houses had launched dozens of FMPs, popular products under the prevailing high interest rate regimes, LIC Nomura has just one.

The performance of equity schemes are also nothing to write home about. At least three schemes -- LIC Nomura Infrastructure, LIC Nomura India Vision and LIC Nomura Top 100 -- have Net Asset Values of less than Rs 10.

Working on performance in equity funds and chalking a clear marketing strategy are key if the fund house has to get out of the rut, say experts. “We are currently working on this year’s budgeting proposals,” said an official in the marketing department of the MF.

In a December interview to Business Standard, Thomas Mathew, managing director of LIC, had said the fund house was making marketing more vibrant and revamping the information technology set-up, procedures and fund management capabilities. He’d also said the fund house would benefit from the global expertise with Nomura.