The domestic mutual funds such as Reliance Mutual Fund and Tata Asset Management Company are in advanced talks with global fund houses and investment advisors, in an attempt to offer global investment products to their Indian investors.
Reliance MF is in talks with the London fund house Schroders, Barclays and Royal Bank of Scotland for a tie-up on a reciprocal basis.
The India-specific funds raised by the global partner from the overseas markets will be managed by Reliance MF. The latter will raise funds from the Indian investors and these will be handled by the global partner. A Reliance MF spokesman confirmed the talks with various global funds.
Tata Mutual Fund is also said to be close to firming up plans to launch a global fund for the Indian investors. Indian mutual funds can collectively invest $4 billion in the overseas markets, with a cap of $200 million per fund house.
The Kotak Mutual Fund recently joined hands with the US-based T Rowe Price, to invest money raised in India into Luxembourg-domiciled T Rowe Price Funds Sicav-Global Emerging Markets Equity Fund. The AMC has already filed the draft application for this feeder fund with the Securities and Exchange Board of India (Sebi).
UTI Mutual Fund, the largest domestic fund house, has tied up with global investment advisors SSgA (Select Street Global Advisory), for its proposed 'Global Navigator Fund'. SSgA, which manages assets worth more than a trillion dollars, will be handling the fund on behalf of UTI MF.
"A foreign tie-up is a must, if you want to launch a global product for Indian investors. It will help us access their research, fund managers, intellectual capital and IT," said Jaideep Bhattacharya, chief marketing officer, UTI Mutual Fund.
According to Sandesh Kirkire, CEO, Kotak AMC, "Overseas investment funds provide the investors an opportunity to diversify their portfolios. Fund houses, which do not have enough expertise on global investments, are tying with global investment companies. The money collected is put into a fund managed by the foreign partner. The investor thus benefits from the global money management expertise of these players," Sandesh Kirkire, Kotak AMC CEO said.
Out of 30 fund houses in the country, one third are purely domestic funds without any foreign partners. These ten funds, including UTI, HDFC MF and Reliance, account for assets worth Rs 1,00,815 crore (Rs 1,008.15 billion), which is nearly 25 per cent of the total assets under management in the MF industry.
Global investment products are on radar of not only the domestic funds, but foreign ones as well. Principal PNB, Franklin Templeton and Fidelity have funds which invest up to $350 million in the overseas markets.
The RBI has now allowed funds to invest into international funds that invest up to 10 per cent of their assets in unlisted securities. This was banned earlier.
"The global funds can easily come out with feeder funds as they have greater expertise in those markets. The joint venture fund houses, where one is a global partner, are set to benefit the most. The domestic partner has better knowledge of local market and the foreign part
- RELIANCE MF is in talks with London fund house Schroders, Barclays and Royal Bank of Scotland
- TATA MF is also said to be close to firming up plans to launch a global fund for the Indian investors.
- KOTAK MF recently joined hands with the US-based T Rowe Price
- UTI MF has tied up with global investment advisors SSgA ner has expertise in other markets. Purely domestic funds' tie up with foreign players takes away responsibility of managing the funds from them. So they are exploring this," said a senior fund manager with a top domestic fund house.
- HSBC is planning a feeder fund, while DBS Cholamandalam and Sundaram BNP are also aiming to go for a global fund.