The bank would hold a majority stake in the proposed subsidiary and has appointed Ernst & Young as consultant to facilitate the process
Mumbai: Leading public sector lender, Bank of India (BoI), is set to enter the mutual funds business and is mulling setting up a separate subsidiary for the business.
The bank would hold a majority stake in the proposed subsidiary and has appointed Ernst & Young as consultant to facilitate the process, a senior BOI official said.
The mutual funds partner is expected to be finalised from a clutch of leading global players by October, the official said.
"We will shortlist around nine to ten players from a list of around 20 leading players to establish a JV partnership. This process would be completed within the next 10-15 days and the final partner chosen in about two months," the official told PTI here.
Last month, BoI had invited Expressions of Interest (EoIs) from consultants for its MF business and has now zeroed in on Ernst & Young from among four to five aspirants, the official said.
The consultant would assist the bank in formulating its business strategies including identifying a 'suitable' partner, the official said.
Though the official declined to divulge the names of the foreign players BoI is in talks with, Spanish mutual funds major, BBVA, is understood to be in talks with the bank. Officials from BBVA declined to comment on the matter.
After finalising its partner, BoI would approach the Reserve Bank of India for the necessary regulatory approvals, the official said. Meanwhile, the life insurance joint venture of Bank of India, Union Bank of India and Japanese firm Dai-ichi, in which BoI holds a 51 per cent stake, is expected to get operational by Q3 FY 09, officials from the banks said. The JV--Star Union Dai-ichi Life Insurance--will use its combined branch strength of nearly 5,000 for the distribution of insurance products. The JV will also utilise its trained staff to sell the insurance products.
Several state-owned lenders including State Bank and Bank of Baroda are already active in the mutual funds space, either through their wholly-owned subsidiaries or joint venture tie-ups with foreign companies.
State Bank has tied-up with French major, Societe Generale Asset Management, which manages over USD 500 billion assets worldwide.
Similarly, Canara Bank has entered into a JV with Netherlands-based Robeco Groep NV. Robeco had acquired a 49 per cent stake in Canbank Investment Management Services last year. As on July 31, the JV has total assets under management of Rs 4,532.6 crore.
Union Bank of India is also readying itself to roll-out mutual funds in the next three to six months. The bank recently entered into an agreement with Belgium-based KBC Asset Management NV. UBI holds a 51 per cent stake in the company while KBC the balance 49 per cent.
© Copyright 2008 PTI. All rights reserved.
(source:MSN)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Thursday, October 2, 2008
Mutual fund sector to grow at 30-35 percent
Kolkata: The mutual fund sector will see a compounded annual growth rate of 30-35 percent in the next three to five years, an official said Monday.
"The mutual fund sector will see a huge growth in the coming three to five years to the tune of 30 to 35 percent. This will happen due to easing of regulations on mutual funds," Birla Sun Life Asset Management Company (BSLAMC) Chief Executive Officer Anil Kumar told reporters here.
He said the company grew at 89 percent last fiscal compared to an industry growth of 60 percent.
Kumar, who was present at the launch of his company's first commodity fund, said BSLAMC grew at 14 percent in the first quarter of the current fiscal against an industry growth rate of six percent.
The company plans to almost double its offices to 200 by the end of this fiscal. Currently, BSLAMC has 110 offices in the country, he added.
Christened Birla Sun Life Commodity Equity Fund, the new product is an open-ended commodity equities fund meant to offer investors long-term capital growth by investing in securities of domestic and overseas commodity companies.
"We see commodities and investments to commodity equities as essential and not an alternate investment class. Commodity is the second largest asset class in terms of investments after foreign currency," Kumar said. Investments to the commodity equity fund can be done in sectors like metals, agriculture and multi-commodities.
Source: Indo-Asian News Service
"The mutual fund sector will see a huge growth in the coming three to five years to the tune of 30 to 35 percent. This will happen due to easing of regulations on mutual funds," Birla Sun Life Asset Management Company (BSLAMC) Chief Executive Officer Anil Kumar told reporters here.
He said the company grew at 89 percent last fiscal compared to an industry growth of 60 percent.
Kumar, who was present at the launch of his company's first commodity fund, said BSLAMC grew at 14 percent in the first quarter of the current fiscal against an industry growth rate of six percent.
The company plans to almost double its offices to 200 by the end of this fiscal. Currently, BSLAMC has 110 offices in the country, he added.
Christened Birla Sun Life Commodity Equity Fund, the new product is an open-ended commodity equities fund meant to offer investors long-term capital growth by investing in securities of domestic and overseas commodity companies.
"We see commodities and investments to commodity equities as essential and not an alternate investment class. Commodity is the second largest asset class in terms of investments after foreign currency," Kumar said. Investments to the commodity equity fund can be done in sectors like metals, agriculture and multi-commodities.
Source: Indo-Asian News Service
Mutual funds are for investment sake
And insurance schemes are best treated as safety nets.
There were some announcements recently by the Life Insurance Council, a lobbying body formed by life insurance companies. Broadly, these announcements appeared to say two things: that the terminology of unit-linked insurance plans (Ulips) would be made uniform and that insurance companies would refuse to underwrite insurance-linked schemes issued by mutual fund companies.
Behind these announcements is the ongoing struggle between life insurance companies and mutual funds.
Mutual funds and life insurance are two distinct products, one intended as a savings vehicle and the other a safety net. However, this distinction has blurred over the last few years. Indeed, one gets a feeling the life insurance companies are also in the business of running mutual funds, categorised somewhat differently as unit-linked insurance plans (Ulips).
Ulips have a mix of characteristics of both insurance and mutual fund schemes.
Crucially, however, the mutual fund aspect of Ulips is regulated by the government under a very different set of rules compared with the real mutual funds.
From the investors’ point of view, the biggest difference between the two categories pertains to how much of his money is actually used for his insurance and his savings and how much is taken away to pay commissions to agents and towards the insurance company’s expenses. The second big difference is in the quality of the information he is given about his investments.
Mutual funds deduct less than 2.5% as the agent’s commission. And as per current norms, there is no deduction if investors don’t use an agent and go directly to a fund company.
(soucre: DNA Money )
There were some announcements recently by the Life Insurance Council, a lobbying body formed by life insurance companies. Broadly, these announcements appeared to say two things: that the terminology of unit-linked insurance plans (Ulips) would be made uniform and that insurance companies would refuse to underwrite insurance-linked schemes issued by mutual fund companies.
Behind these announcements is the ongoing struggle between life insurance companies and mutual funds.
Mutual funds and life insurance are two distinct products, one intended as a savings vehicle and the other a safety net. However, this distinction has blurred over the last few years. Indeed, one gets a feeling the life insurance companies are also in the business of running mutual funds, categorised somewhat differently as unit-linked insurance plans (Ulips).
Ulips have a mix of characteristics of both insurance and mutual fund schemes.
Crucially, however, the mutual fund aspect of Ulips is regulated by the government under a very different set of rules compared with the real mutual funds.
From the investors’ point of view, the biggest difference between the two categories pertains to how much of his money is actually used for his insurance and his savings and how much is taken away to pay commissions to agents and towards the insurance company’s expenses. The second big difference is in the quality of the information he is given about his investments.
Mutual funds deduct less than 2.5% as the agent’s commission. And as per current norms, there is no deduction if investors don’t use an agent and go directly to a fund company.
(soucre: DNA Money )
More Choice for Mutual Fund Investors
The competition for Indian mutual fund companies is likely to hot up. In addition to battling a weak market, Indian mutual fund companies have to deal with a influx of new players. Though the markets remain weak, there is no dearth of players seeking to have a pie of the Indian financial sector. Recently, the market regulator gave in-principle approval to seven players to set up mutual funds in India, including Edelweiss, Goldman Sachs and Indiabulls.
Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.
The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the averagefund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd?
It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.
(Blog at WordPress.com.)
Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.
The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the averagefund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd?
It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.
(Blog at WordPress.com.)
India's mutual funds face profit squeeze - HSBC
MUMBAI, Sept 15 (Reuters) - India's funds industry may see profits drop in 2008/09 as volatile stocks make selling equity funds tough, limiting the ability of domestic fund houses to attract fresh investors, a top executive at HSBC (HSBA.L: Quote, Profile, Research) said.
Vikramaaditya, chief executive of HSBC's Indian mutual fund unit, said costs continued to rise as the industry invested in expanding reach as well as to attract and retain scarce talent.
"This year will be largely difficult for the industry as a whole," he told Reuters on Monday.
"I do not think any player in the industry would be excluded from that and would not have the impact," said Vikramaaditya, who joined the firm in July from HSBC's securities services unit.
Dazzled by a five-year bull run in which stocks rose six-fold, Indian investors piled up equity funds, helping assets quadruple to 5.5 trillion rupees by December 2007.
But, a plunge in shares this year by a third has seen high-margin equity assets slump by a fourth and the industry's assets down about 1 percent, hurting industry-wide profitability.
"Revenues are under pressure. Costs are still growing," said Vikramaaditya, a sports enthusiast who also likes to travel and try out new cuisines, adding most of the flows were coming in lower-margin fixed income funds.
Stock funds saw first net outflows of about 630 million rupees in 11 months in August. Low-margin close-ended debt funds cornered 90 percent of the industry's total inflows of about 196 billion rupees during the month, data from the Association of Mutual Funds in India showed.
Consultancy firm McKinsey & Company estimates profitability of large and medium-sized funds in India was about 23 basis points (bps) of assets under management last year.
Factoring in the shift to lower-margin products, it estimates profitability could drop to below 15 bps this year.
While existing players will take a hit on profitability, new players would have to redefine their payback period, he said.
"They might have to look at longer gestation periods before they start making profits," said Vikramaaditya.
HSBC India fund unit has seen average monthly assets grow marginally to 169 billion rupees in the six months to August as compared to a 4 percent decline in the industry's assets. (Reporting by Nishant Kumar; editing by )
(source:Reuters India)
Vikramaaditya, chief executive of HSBC's Indian mutual fund unit, said costs continued to rise as the industry invested in expanding reach as well as to attract and retain scarce talent.
"This year will be largely difficult for the industry as a whole," he told Reuters on Monday.
"I do not think any player in the industry would be excluded from that and would not have the impact," said Vikramaaditya, who joined the firm in July from HSBC's securities services unit.
Dazzled by a five-year bull run in which stocks rose six-fold, Indian investors piled up equity funds, helping assets quadruple to 5.5 trillion rupees by December 2007.
But, a plunge in shares this year by a third has seen high-margin equity assets slump by a fourth and the industry's assets down about 1 percent, hurting industry-wide profitability.
"Revenues are under pressure. Costs are still growing," said Vikramaaditya, a sports enthusiast who also likes to travel and try out new cuisines, adding most of the flows were coming in lower-margin fixed income funds.
Stock funds saw first net outflows of about 630 million rupees in 11 months in August. Low-margin close-ended debt funds cornered 90 percent of the industry's total inflows of about 196 billion rupees during the month, data from the Association of Mutual Funds in India showed.
Consultancy firm McKinsey & Company estimates profitability of large and medium-sized funds in India was about 23 basis points (bps) of assets under management last year.
Factoring in the shift to lower-margin products, it estimates profitability could drop to below 15 bps this year.
While existing players will take a hit on profitability, new players would have to redefine their payback period, he said.
"They might have to look at longer gestation periods before they start making profits," said Vikramaaditya.
HSBC India fund unit has seen average monthly assets grow marginally to 169 billion rupees in the six months to August as compared to a 4 percent decline in the industry's assets. (Reporting by Nishant Kumar; editing by )
(source:Reuters India)
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