HDFC MF buys Morgan Stanley’s mutual fund unit

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In yet another consolidation move in the much-stressed mutual fund sector, industry leader HDFC Mutual Fund on Monday acquired its smaller rival Morgan Stanley Mutual Fund.

Morgan Stanley Mutual Fund, which entered India some 20 years back and launched its first scheme in 1994, currently runs a total of eight schemes with assets worth Rs 3,290 crore. The US-based financial services giant had got Sebi’s registration in 1993.

Announcing the agreement, HDFC Asset Management Company managing director Milind Barve said: “The agreement is subject to regulatory approvals as required. The average combined assets under management of the eight schemes for the quarter ended September 30 was Rs 3,290 crore.”

The deal comes within days of Sebi chairman UK Sinha expressing his desire to see some consolidation in the industry, as he felt that there were several non-serious players.

“We have signed a definitive agreement to acquire all the eight schemes of Morgan Stanley Mutual Fund in India,” he said.

The fund house did not disclose the deal size. The acquisition will help increase the customer base of HDFC Mutual Fund, which is already the largest fund house with assets under management of Rs 1,03,046 crore.

The mutual fund industry has been going through tough times for many months now amid difficulties on the distribution side and waning investor interest.

At the end of November 30, total asset under management of the industry stood at Rs 8.9 lakh crore, up from Rs 7.01 lakh crore on March 31.

Rising costs and accumulating losses have forced several overseas money managers to sell their mutual fund businesses in India. US-based fund manager Fidelity Worldwide Investment exited India last year, eight years after it had entered the country.

L&T Mutual Fund, a subsidiary of L&T Finance Holdings, acquired Fidelity’s Indian mutual fund business for an undisclosed amount in March 2012.

The total asset under management of the combined entity stood at Rs 13,497 crore at the time of the deal, placing L&T Mutual Fund at 13th position in the overall ranking of top mutual fund houses in the country. L&T Finance had begun the mutual fund business by acquiring DBS Cholamandalam Asset Management for Rs 450 crore in 2009-10.

Among other exits, Dutch financial major Aegon surrendered its mutual fund licence in India the same year while, Axa Investment Managers, another global fund, exited its stake in Bharti Axa to the Bank of India.

However, some other global players such as JP Morgan, Franklin Templeton and BlackRock have significant presence in India and are doing well. There have also been fresh investments from global players in the mutual fund industry.

In the past three years, Goldman Sachs entered India by acquiring ETF provider Benchmark Mutual Fund, T Rowe Price bought 25 per cent stake in UTI Mutual Fund and Schroders bought 25 per cent in Axis Mutual Fund, to name a few. In 2009, Nomura Asset Management picked up 35 per cent stake in LIC Mutual Fund for Rs 3,080 crore.

There are over 45 fund houses in the country, but Sebi chairman UK Sinha has been saying that there is a case for consolidation in the asset management industry due to presence of some non-serious players. According to an estimate, mutual funds have lost over 20 lakh investors in the first seven months of this financial year (2013-14).

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