India curries favour with fund managers
While India may not be the first port of call for fund managers looking to expand overseas, some managers are already looking to cement their fledgling positions there.
While India may not be the first port of call for fund managers looking to expand overseas, some managers are already looking to cement their fledgling positions there.
According to the Bloomberg wire service, Indian managed funds passed the 1 trillion rupee ($A37 billion) mark for funds under management.
“Money is pouring in, we now get 6,000 new investors a month, up from 350 last year," says Al-liance Capital Management (India) marketing vice president Sandeep Dasgupta
The oldest fund in the country, the state owned Unit Trust of India still remains the largest with $A25 billion under management, according to trade body, the Association of Mutual Funds in India (AFMI)
However private managed funds including that of Alliance Capital and local operators Birla Sun Life Asset Management, have $A8.7 billion, or 23 percent of the total invested in Indian stocks and bonds at the end of January.
The drawcard for investors is the surge in prices with the local benchmark stock index gaining 82 per cent since January last year after an 18 per cent drop over the previous three years.
The other major factor is tax laws which favour equity based investments as a result of changes in tax rules that exempts tax on dividends from such funds, unlike bond coupon payments and interest on bank deposits.
Another reason for the attraction is returns from these have outpaced more traditional invest-ments in the seven years since these funds were allowed to operate in one of the world's largest potential markets.
One example is local fund offering, Birla Advantage Fund, unveiled by Birla Sun Life in March 1995 which has seen an average annual return of 53 percent, matching that of the Alliance '95 fund which is 70 percent invested in stocks.
Private firms have seen the biggest inflows and while funds under management with Unit Trust grew by 26 per cent between March 1999 and January of this year, AFMI says its private com-petitors saw a three fold increase in assets across the same time period.
Alliance Capital currently has $A1.7 billion invested in 10 plans, up from one plan in February 1995. This is echoed by UK firm Prudential Assurance who started with three plans in June 1998 and now manages a similar amount in eight plans.
The local arms of other foreign fund management companies are also doing well with Merrill Lynch and Franklin Resources Templeton funds unit managing more than A$376 million each.
AUTHOR
Jason Spits
Recommended for you
Pendal has told investors it will start winding up its Enhanced Credit fund from December, its third fund closure this year.
A potential acquisition of Platinum Asset Management by Regal Partners will be beneficial for the “challenged” fund manager, believes Morningstar, but it has warned fund management mergers don’t always run smoothly.
Fund managers made a “big shift” into bond-sensitive sectors like utilities in September and away from cyclicals, while risk appetite is at an 11-month low.
Ahead of the RBA’s upcoming monetary policy meeting next week, BlackRock Australasia has reaffirmed the market’s view that rate cuts are likely out of the picture for 2024.
