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Smaller fund houses to fight it out with the big players

Lay out individual strategies to compete with them, reach Sebi's networth target

Chandan Kishore Kant  |  Mumbai 

Mutual Fundr image via Shutterstock

The viability of smaller fund houses has always been questioned, more so now with the recent regulatory changes.

Sebi's ruling that all fund houses should have a networth of atleast Rs 50 crore was a big jolt to the smaller players. Despite strong protests from the smaller fund houses, the regulator raised the threshold capital from Rs 10 crore to Rs 50 crore (against widespread expectation of Rs 25 crore) to weed out non-serious players. Sebi has given fund houses three years to reach the threshold level.

The assets too are skewed towards the biggest fund players. As on date, 80% of the sector's total asset under management (AUM) is managed by the top ten fund houses, while the rest 33 players compete for the smaller pie.

While eight fund houses have infused fresh capital and reached the networth mark, questions still remain.

Indiabulls Mutual Fund, which has an average AUM of Rs 3,087 crore, had a networth of Rs 14.6 crore at the beginning of the current financial year. However, its sponsor Indiabulls Housing Finance infused capital and raised networth to Rs 61 crore by year end.

Akshay Gupta, Associate Director & CEO, Indiabulls AMC says,"Products like newly launched high yield real estate Alternate Investment Fund managed by Indiabulls AMC, focussing on educating individual investors, and services like Missed Call Portfolio statement, round the clock call center are among some initiatives being undertaken by Indiabulls AMC to reach out to investors for appropriate solutions.”

Quantum Mutual Fund, one of the smallest but yet a profitable fund house, has already carved out a niche among investors. The fund house is not perturbed much with undue competition from larger counterparts.

Jimmy Patel, CEO, Quantum MF, says, “We plan to continue to stand up and do what is right for our investors including fight against the "business" of gathering assets that have been adopted over the past decade. We will never mis-sell our products with a desire to grow AUM and we will stick to our mission to be transparent, true to label and aim to deliver sensible, risk-adjusted, long-term returns.”

Quantum took several measures much ahead of it becoming industry’s norms. For instance, it has always been on the forefront when it came to direct selling to investors, use of technology and paperless transactions. As on 31 March, 2014, Quantum’s networth stood at Rs 28.27 crore, which it plans to raise by Rs 9 crore before the its sponsor infuses the required capital to reach the Rs 50 crore mark.

According to G Pradeepkumar, CEO, Union KBC Mutual Fund, “We will continue to expand our distribution reach by adding more distributors including IFAs. We are confident that we can be successful with this approach. One of the areas that we are looking at closely is the possibility of raising offshore money to be managed in India.” The fund house, currently has a networth of Rs 38 crore and plans to raise it to the required level.

Edelweiss Mutual Fund, a relatively new entrant in the fund management space, has also successfully raised its networth to Rs 70 crore.

Edelweiss CEO Vikaas Sachdeva believes that the sector has the maximum potential for financial inclusion across investor segments.

He says, “As an organization,we have created our own growth model by positioning ourselves as a fund house with low volatility equity solutions and smart investment options. We are upbeat on the growth of “alternate” investment options like Exchange Traded Funds (ETFs) in the country. As part of this strategy, we have access to MSCI’s range of ETFs which would be a catalyst for the growth of the institutional market in this space.”

Further, he made it clear that the fund house is open for acquisitions at a reasonable valuation if it fits in its growth strategy.

Taurus Mutual Fund, one of the oldest private sector in India, has been a laggard for quite few years now. However, the fund house wants to continue in the business and is targeting to reach a networth of Rs 75 crore before March, 2017. It has been raising its networth for the last one year. Currently, it has a networth of Rs 20 crore against Rs 12 crore a year before.

Since the fund house has one of the lowest networth, its primary focus is to increase the capital.

India Infoline AMC, another new entrant, too has successfully raised its networth to Rs 52.14 crore against Rs 18.7 crore as on 31 March, 2014.

Prashasta Seth, CEO, India Infoline AMC, says, “We are looking to build 3 businesses under AMC - Mutual Funds, AIF and PMS. We are looking to launch a single scheme with a differentiated strategy for each asset class. This strategy will ensure better clarity for investors and do away with confusion created by multiple similar strategies of . ”

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First Published: Wed, January 21 2015. 11:54 IST