Mumbai: Barely a fortnight after parting ways with Nimesh Kampani-controlled JM Financial group, Morgan Stanley is all set to relaunch its domestic asset management business.
Morgan Stanley was the first foreign fund to launch asset management business in India. Its lone scheme, Morgan Stanley Growth Fund, launched in 1994, is India’s single-largest close-ended equity scheme. However, it never followed it up with another fund.
Confirming the development, Narayan Ramachandran, managing director and CEO of Morgan Stanley Investment Management India, told Mint: “We plan to expand our domestic asset management business.”
Currently Morgan Stanley has a stock-broking business that deals with foreign institutional investors and a business process outsourcing facility in Mumbai.
Its global competitor Goldman Sachs that parted ways with Kotakgroup in March 2006 too plans to enter the domestic asset management business. Like Morgan Stanley, Goldman Sachs too has a BPO and an investment banking business in India.
Merrill Lynch, the third of the trio which compete globally, is present in securities broking, asset management and investment banking in India in addition to other fund-based financial services.
“We plan to offer the efficient frontier of investments from cash to equities to special investments and have already begun building our sales and distribution team. ,” says Ramachandran.
The firm, which currently has assets under management of Rs3,177 crore, has recently taken on board the head of sales of HSBC India mutual fund Anthony Heredia. It has started a pre-marketing exercise with the top fund distributors in the country. It is also hiring more staff in its equity investment management team.
It is learnt that as part of this relaunch, the firm may also look at changing Morgan Stanley Growth Fund from a close-ended scheme which trades at a discount to its intrinsic value on the stock exchanges to an open-ended one where investors can buy and sell units freely. However, such a conversion ahead of its 2009 redemption date would require unit holders to be given an option to exit at fair value and the units to be delisted from the stock exchanges. This process would therefore take some time. Ramachandran said, “All options are open at this point of time.”
The market price for a Rs10 Morgan Stanley Growth Fund unit even touched a high of Rs100. For a long time it traded at premium to its net asset value (NAV). Thereafter a prolonged bear phase in the Indian stock markets saw the fund trading at a discount to its NAV.
The closed-end fund now trades at 7% discount to its NAV. This effectively means that one can buy the units of this fund from the NSE at Rs42.55 as on 5 March, while the fair value of unit is Rs45.33. The differential between the market price and the NAV used to be as high as 30% in 2003. Over the past five years, the fund’s NAV has risen by 32% while the Sensex and S&P CNX Nifty have gone up 28% and 25%, respectively.
In February 2007, Morgan Stanley and JM Financial announced their plan to part ways. As a part of this separation, Morgan Stanley has bought out JM Financial’s 49% stake for $445 million in the JV company that handled the institutional broking business.