NSE, BSE may join hands for mutual fund trading

The proposed online portal will help investors buy and sell mutual fund units and get onsolidated statements

A working group of the Association of Mutual Funds in India, or Amfi, has recommended that India’s two largest bourses, along with other firms, jointly build a transaction platform for mutual funds trading in India.
The group has suggested jointly engaging three consortia that have bid to build the platform: National Stock Exchange and National Securities Depository Ltd; Bombay Stock Exchange and Central Depository Services Ltd; and registrars Karvy Computershare Ltd and Computer Age Management Services Ltd.
“We have recommended an open architecture where strengths of all three consortia will be leveraged for the benefit of the mutual fund industry,” said Jaideep Bhattacharya, who heads the Amfi committee and is chief marketing officer of UTI Asset Management Co. Ltd.
The committee, which submitted this proposal to Amfi last week, has also suggested that mutual fund trackers Morningstar India and rating agency Icra Ltd provide the data support for this platform.
Amfi expects the platform to go live by March.
The proposed online portal will help investors buy and sell mutual fund units and get consolidated statements. With the abolition of upfront commission, few distributors are keen on servicing small investors and the transaction platform will come in handy for them.
“We have received proposals on the operationalization of the platform. A decision will be taken in a week or two. The final clearance has to come from Sebi,” said A.P. Kurian, chairman, Amfi.
According to him, the platform would provide a better reach for the industry, higher efficiency in transactions and cost control over a long term. “Similar platforms exist in developed markets like Australia and Canada. It is our effort to bring such world-class service to our investors,” he told Mint.
Officials from the bidding companies refused to comment as the proposal is yet to be finalised. The chief executive officers of four leading asset management companies confirmed the broad structure of the proposal but refused to comment as they are not familiar with the details. “A presentation is likely to be made for the members in a couple of weeks, after which a decision will be made,” one of them said.
In a parallel move, Amfi is exploring the listing of open-ended mutual fund schemes on an exchange platform.
The system has to be tweaked in such a manner that the relevant mutual fund will be the counterparty for transactions and the registrar will have to create and extinguish units for every purchase and sale, respectively, say industry experts.

Source: http://www.livemint.com/2009/09/28235001/NSE-BSE-may-join-hands-for-mu.html?h=B

'Banks have not developed the system model to distribute third-party products'

Italy-based Pioneer Investments, which signed an asset management joint venture agreement with Bank of Baroda (BoB) last year in a major move to extend its presence in India’s mutual fund market, is set to increase its presence in 300 branches of BoB in the next year. Its CEO-Asia, Angus W Stening, puts emphasis on the need for banks to be the main distribution channel after the Securities and Exchange Board of India (Sebi) tweaked norms, in a conversation with Chandan Kishore Kant. Excerpts:

What impact would Sebi’s new norms on entry load have on the Indian mutual fund industry?

It will definitely be a catalyst for the change in the distribution dynamics. The independent financial advisors (IFAs) will always play a role for all sorts of products. This industry has been an IFA-driven market from the start. However, have we seen a change in the first two months? No, we have not.
Now the question is, will the financial advisors move away from mutual funds to deposits or life insurance products? Absolutely, they will. But will the investors stop buying mutual funds, as they have to give commissions to the advisors? No, that will not happen.

Which part of the distribution channel will have to be more active now?

It will be the banks. I think this is one regulatory change which will make banks more active in the distribution side of the business, particularly the public sector banks. How they do that and how they structure has to be seen. The banks now have to be a part of the process.

Why banks? Why not the financial advisors?

The banks are more trusted and regulated institutions. The national reach of the branch network of banks and their customer base is amazing in India.
The public sector banks, in particular, have the reach which a foreign bank may not be able to achieve. Why is there a lower penetration in distribution of mutual fund products? A concern which Reserve Bank of India (RBI) rightly pointed out in its annual report. It is because the banks have not developed the system model to distribute and the processes to manage the distribution of third-party products. And this change in norms will require that.

What’s your plan for expansion in India?

Our target is to have presence in 300 branches in the next 12 months. These will be access points for the investors to buy our products.
Clearly, we want to take that number up as time goes on. Bank of Baroda (BoB) is a good partner and has provided us access to public sector space. We need to create a distribution channel. Since July last year, we focussed on the training of staff in the Baroda branches. At the same time, we are very focused on costs. We don’t want to take a conservative approach but a measured approach.

Won’t you look for channels outside Baroda branches?

I don't have a retail chain outside Baroda and I don’t plan one for at least the next 12 months. Our focus is to support Baroda. We both feel we need to invest in our point of sales locations.
What you do in this business is develop a prototype model and replicate it around the nation. When we start to see some traction, then only can we start opening up and broadening our distribution base to non-Baroda for retail.

What portion of your asset under management comes from retail and institutions?

Currently, institutional participation is as high as 95 per cent. For the retail space, we need to have a product pipeline.

You are hugely dependent on institutions.

Absolutely, yes. I think initially in the first six months, else could we go across Rs 5,000 crore in equities? No.

Where do you see your retail participation in future?

India has not got a 50-year track record in equity investment. I will be happy to get 25 per cent of the assets from retail and 75 per cent from the institutions.

You don’t sound bullish on growth from smaller cities and towns, which is in contrast with what the local CEOs talk of.All I’m saying is that we are not there now. And, possibly could not be there, as we are very much at the beginning. Managers have to look at this for a long-term business and turn away from short-term opportunistic goals. The structural change from Sebi in terms of front-end load is going to have long-term implications.

Will you invest in the branding of your JV with BoB?

We don’t have to do a joint venture brand. Since we have a strong brand and Bank of Baroda is equally a strong brand, then why the need to invest in a third brand?

Source: http://www.business-standard.com/india/news/%5Cbanks-have-not-developedsystem-model-to-distribute-third-party-products%5C/371452/

L&T Fin pays Rs 45 cr for DBS Chola AMC

L&T Finance — the financial services arm of engineering major Larsen and Toubro — announced its entry into India’s mutual fund industry on Thursday, by buying DBS Cholamandalam Asset Management for Rs 45 crore.
The buyout values DBS Cholamandalam AMC — a unit of the joint venture between the Murugappa Group and Singapore’s DBS, at 1.55% of its total assets under management of Rs 2,893 crore on August 31.
Equirus Capital was advisor to L&T Finance for the deal, while Edelweiss Capital advised DBS Chola. Industry officials said the valuation is one of the lowest among the deals in the domestic mutual fund industry in the recent years.
In June, Japan’s Nomura bought a stake in LIC Mutual Fund for a valuation of about 2.5% of the fund’s assets under management. Last year, IDFC bought Standard Chartered Bank’s asset management business for a price that worked out to 5.7% of assets under management. Both these deals were considered expensive for the buyers, as a major chunk of the assets was debt at the time of acquisition.
Some in the industry believe that the deal is expensive for L&T as well, given the asset management company’s debt-laden asset mix. DBS Cholamandalam’s total assets comprises close to Rs 253 crore in equity and the rest in debt, according to data from Morningstar India, quoting AMFI figures.
The mutual fund industry has been abuzz with talks about DBS Cholamandalam AMC being on the block since 2007, though the company has officially denied it all the while. The current valuation is just a shade of what was offered to buy the AMC in 2007, said a person, who was familiar with the talks during the last stake sale attempt in 2007.
“The promoters were asking for 8% of the assets in 2007, when assets were over Rs 5,000 crore. What was offered was 6%,” said the person, on condition of anonymity. DBS Cholamandalam officials were unavailable to comment on the matter.

Source: http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/engineering/LT-Fin-pays-Rs-45-cr-for-DBS-Chola-AMC/articleshow/5058414.cms