More foreign MFs on way out as Nomura plans to exit LIC

Mumbai: Japanese fund house Noumra may become the 10th foreign asset management company to exit the crowded Indian MF market in the past seven years if it calls off the five-year joint venture with state-run insurance giant LIC as is widely speculated.

With the exit of Goldman Sachs India AMC, which sold its business to Reliance Capital today, there are 43 MFs in India managing a tad over Rs 13-trillion worth of assets.

The reports about Nomura planning to call of its JV with the mutual fund business of LIC comes on a day when the Wall Street major sold its entire business to Reliance Capital Asset Management (RCAM) for Rs 243 crore, making the American fund house the seventh one to leave the country.

The market is abuzz with talks that Nomura India AMC is unlikely to renew its five-year contract with LIC and is planning to completely exit its mutual fund business here. The Japanese firm holds 35 percent stake in LIC-Nomura MF, which had an AUM of a little over Rs 11,157 crore as of September- end, making it the 19th largest player in terms of AUM.

Nomura is unlikely to renew its contract with LIC in its mutual fund venture, when the five-year term comes to an end early next year, according to sources. Both LIC as well as Nomura declined to comment on the media reports.

Since 2008, a number of global MFs have exited India. While StanChart India AMC sold its business to IDFC in 2008, Fidelity sold its mutual fund to L&T Finance in 2012, and HDFC MF acquired Morgan Stanley's fund business here in 2013. In the same year, SBI Mutual Fund bought Daiwa AMC.

Last year saw Birla SunLife acquiring ING Mutual Fund, Kotak MF buying out PineBridge Mutual Fund and Pramerica is in the process of taking over Deutsche Bank's MF business.

Early this month, state-run Union Bank of India agreed to buy out the 49 percent stake in the Belgian fund house KBC from its mutual fund business here Union-KBC Mutual Fund.

Making its first-ever buyout, RCAM has decided to acquire all 12 onshore schemes of Goldman Sachs AMC with total assets base of Rs 7,132 crore. The deal will make Reliance MF the exclusive fund manager for Government's ambitious Central Public Sector Enterprises (CPSE) Exchange Traded Fund.

LIC Mutual Fund has been in existence for the last 25 years. LIC's partnership with Nomura began in January 2011 with a tenure of five years after which both partners are free to decide the future course of action.

"Most of the funds managed by them (LIC-Nomura MF) are performing extremely well and looking at the wide experience of their fund managers, it will only get better from here," the sources said.

LIC Nomura's funds have been performing well in

comparison to the peers. In the past, the 1-year G-sec funds have been able to deliver around 15 percent returns and the MF's investments are in high-quality corporates, thanks to its strong in-house research team.

"Our performance has been consistent and competitive, which are reflected in our AUM growth," LIC Nomura MF Chief Investment Officer Saravana Kumar told PTI today.

"The equity scheme has been delivering a CAGR of 15.8 percent for the past three years, while our tax plan scheme has generated 18.7 percent CAGR during the same period against the Sensex's return of 11.7 percent in the same time-frame," Kumar added.

This growth came in even as the fund house didn't launch a single product between 2009 and 2012.

Justifying the decision, Kumar said "this was a calculated decision as we wanted to improve the investment performance of our existing products."

LIC Executive Director Saroj Dikhale took over as the Chief Executive of LIC Nomura MF this July. Its AUM rose to Rs 11,157 crore as of end September from Rs 9,313 crore in March 2015.