Why foreign mutual funds keep being laggards in India?
In Indian finance industry, anything foreign is really important and carries enormous has weight. However, Indian public does not seem to buy the hype. Be it foreign banks or foreign mutual funds, most just fail to make an impact.
After huge hype over their entry, both Goldman and Nomura are exiting Mutual Fund space in India:
Reliance Capital Asset Management (RCAM) will take over Goldman Sachs’ mutual fund business in India for Rs243 crore. RCAM will acquire all 12 mutual fund schemes of Goldman Sachs Asset Management India. Goldman Sachs, which does not have a strong retail focus, had surprisingly decided to enter the Indian mutual fund industry in 2011, by acquiring Benchmark Mutual Fund for Rs120 crore. The fund has a total asset under management (AUM) of Rs7,132 crore. Frustrated by poor market prospects after 2009, a number of global players like Fidelity, Daiwa, Morgan Stanley, ING, PineBridge and Deutsche have already exited the Indian mutual fund business over the past few years. According to newspaper reports, Nomura too plans to sell its 35% stake in LIC Nomura Mutual Fund. Nomura had entered India just four years ago.
In 2012, Fidelity’s business was taken over by L&T Finance, while last year Morgan Stanley was bought by HDFC Mutual Fund. Other smaller foreign players too, called it quits in the recent past, finding it increasingly difficult to stay afloat in the highly concentrated Indian mutual fund industry. While there are more than 40 fund houses in the country with total AUM of over Rs13 lakh crore, the bulk of the assets are skewed towards the big players. Naturally, the profits too are skewed towards the top AMCs. The large asset management companies making super profits and the smaller players struggle to survive. There were 21 mutual funds which made a profit totalling about Rs1,500 crore, while 20 mutual funds made a total loss of about Rs300 crore. The top seven fund houses reported a double-digit growth.
Well, we still have foreign players like Prudential and Sun Life in the list but both are in a Joint Venture with prominent Indian players. So, Indian public trusts the Indian names much more than the foreign counterparts. Same is the case with foreign banks and foreign insurance firms as well.