India’s first fund house that specialized in managing passive funds, Benchmark Asset Management Company (AMC) Ltd, has been acquired by Goldman Sachs Asset Management. Though Goldman Sachs refused to disclose the amount, our MF industry sources say the deal is valued at Rs130 crore. With Benchmark AMC’s assets under management at Rs2,935 crore as per its December 2010 portfolios, Goldman Sachs has paid about 4.43% of Benchmark AMC’s assets. Goldman Sachs will acquire 175,000 investors of Benchmark AMC and its four branches. In a statement, Goldman Sachs said all existing employees of Benchmark AMC will be retained.
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This is not the first time that Goldman Sachs has tried to enter the mutual fund (MF) industry. In September 2008, it got an MF licence, but the 2008 credit crisis hindered it. This time, however, it seems to have made a stronger entry by acquiring an existing fund house and one that is renowned for exchange-traded funds (ETFs).
Says Dhirendra Kumar, chief executive of Value Research, an MF data tracker: “Goldman Sachs wanted to make a strong statement by acquiring an existing good brand name because last time they went back. Besides, Benchmark AMC was also facing competition from existing players as fund houses such as Motilal Oswal Asset Management Co. Ltd and IDBI Asset Management Ltd have also entered the passive funds space.”
What should Benchmark MF investors do?
It’s too soon to say what Goldman Sachs would do after the acquisition; it refused to comment and said it will soon announce its future plans. Expect two main changes initially.
First, expect Goldman Sachs to bring in actively managed MFs. However, Benchmark AMC’s existing ETFs will continue since Goldman Sachs has decided to retain all Benchmark’s employees. “Since the staff is retained, my understanding is that existing schemes will continue. Goldman Sachs is obviously free to add more products, especially actively managed schemes,” says S.A. Dave, a trustee of Benchmark MF and former chairman of Unit Trust of India. Typically, the existing team of Benchmark will continue to manage the existing schemes.
Second, Goldman Sachs will rope in distributors to the market and sell its schemes. Benchmark AMC had largely avoided distributors since it mainly managed ETFs. Expect Goldman Sachs to align with a strong distribution army.
Existing investors of Benchmark AMC should stay put.