Ownership change at fund houses: Be watchful, halt SIPs if necessary

If the ownership changes at DSP are accompanied by exit of key personnel, you should stop your SIPs and resume them only when things stabilise

Events are underway currently that will result in changes in ownership patterns at two fund houses. On one hand, DSP group has bought out Blackrock's 40 per cent stake in DSP Blackrock Investment Managers. On the other, the bidding process for sale of IDFC Mutual Fund is underway. When such changes take place at fund houses, they do introduce an element of uncertainty. Investors who have invested in the funds of these two fund houses need to keep a close eye on developments.

DSP Blackrock Investment Managers is currently the ninth largest asset management company in India. According to media reports, the parting of ways happened because Blackrock wanted an absolute majority in the asset management business, which the DSP group was reluctant to give up, given the prospects of the asset management business in a fast-growing economy where savings are getting increasingly financialised.

This parting of ways will affect investors. "Blackrock is one of the biggest players in the asset management business. Due to the joint venture, the DSP group would have got access to their international processes, something that they would not have enjoyed if DSP were a stand-alone entity," says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors. Partnership with a prestigious international partner would have also allowed the fund house to attract the best of talent.

The change of ownership could also be associated with changes in personnel. Recently there were reports that the chief investment officer, equities, maybe on his way out. Exits by key fund management personnel can affect fund performance. If he quits, investors should watch out for the person who replaces him, and his track record.

Many of the international funds run by the joint venture are funds of funds, where the Indian fund invests in a mother fund run by Blackrock. Investors need to keep a close eye on whether this arrangement will continue in the future as well.

Experts, therefore, advise caution. "Owing to the large-scale changes happening at DSP, investors should stop their systematic investment plans (SIPs) in the funds belonging to this fund house, though there is no need to withdraw money yet. Keep an eye on developments at the fund house for a few quarters. Once things stabilise and the performance of your fund remains unaffected, you can always restart the SIP," says Dhawan.

As for IDFC Mutual Fund, Reliance Capital and the Blackrock group have emerged as the topmost contenders. As both the suitors for the fund house are well-known entities in the fund management domain, investors are likely to benefit from a takeover. BlackRock currently has no independent presence in India. If it succeeds in the purchase of IDFC, then how a new team gets created for the domestic India business, and its quality, remains to be seen. Continue with your SIPs in that fund house for the present but keep a close watch on developments.