Mumbai: Indian asset manager DSP BlackRock Investment Managers Ltd is shutting down its portfolio management services (PMS) business, said an official spokesperson of the company.
The firm, 60% owned by investment banker Hemendra Kothari’s DSP group and 40% by the world’s largest publicly traded asset management firm BlackRock Inc., is closing the PMS business “as it is only a small part in the context of its mutual fund business”, said the spokesperson.
DSP BlackRock manages Rs60 crore in discretionary assets under its PMS unit. This will be entirely liquidated to its clients, the spokesperson said.
The current assets under management (AUM) of the company’s mutual funds business is about Rs16,500 crore.
DSP BlackRock employs 290 people. The number of job losses from the shutting down of the PMS unit couldn’t immediately be ascertained.
DSP BlackRock chairman Kothari said, “Our focus is not on individual personal portfolios. We are interested in managing large corporates, institutional portfolio—local or international. We believe our mutual fund portfolio is well managed by our fund managers, and individual investors can easily put the money directly as they get a tax advantage, which they don’t enjoy if they use the portfolio management route.”
According to him, insurance companies worldwide are currently investing both through their in-house and outside fund managers to spread the risk. “BlackRock has portfolios of large insurance companies and pension funds,” he said.
The total assets parked with wealth management units in India is only a fraction of the assets managed by the Rs4.93 trillion mutual funds industry, which has 38 players.
Reliance Capital Asset Management Ltd leads among mutual fund firms with Rs80,963 crore of AUM, followed by HDFC Asset Management Co. Ltd (Rs57,956 crore), ICICI Prudential Asset Management Co. Ltd (Rs51,432 crore), Birla Sun Life Asset Management Co. Ltd (Rs47,096 crore) and Franklin Templeton Asset Management (India) Pvt. Ltd (Rs19,205 crore).
DSP BlackRock is the eighth largest asset manager in terms of AUM. Globally, BlackRock manages a trillion-dollar portfolio under its asset management business.
Among mutual fund managers, Reliance Capital, HDFC Asset Management and Kotak Mahindra Asset Management Co. Ltd have large PMS businesses, including portfolio advisory for institutional funds. DSP BlackRock, the erstwhile DSP Merrill Lynch Fund Managers, was formed 13 years ago as a joint venture between DSP Merrill Lynch and Merrill Lynch Investment Managers Lp. The fund manager changed its name after BlackRock bought out Merrill’s 40% stake in early 2008. This helped the latter exit the business in India as part of a global realignment.
Merrill’s India wealth management business, including discretionary and non-discretionary services, is among the biggest in the country.
DSP BlackRock has been managing client’s wealth only under the discretionary platform. It also has a distribution business for structured products, which sells debentures issued by third parties to clients.
Although the PMS division will wind up, the structured notes sold to clients will remain unaffected till the debentures reach maturity date, said the spokesperson. The maturity date of structured products vary, though many are in the band of around 18 months.
The PMS unit has Rs188 crore of third-party issued structured products sold to clients, which are yet to mature, according to the spokesperson. The main issuers of structured products in India are Merrill Lynch and Citigroup Inc.
DSP BlackRock does not have any assets under its advisory business. According to the spokesperson, the firm had advised a local insurance company between 2004 and 2007 till the business was taken in-house by the client.
“It’s good for the industry that smaller players are shutting down,” said the head of the PMS unit at a large mutual fund house in India, who did not want to be named. According to him, DSP BlackRock had some Rs400 crore in assets and advisory at its peak. The slowdown in business and outflow of assets have forced it to shut the PMS business, he said.
The spokesperson did not quote a figure when asked about the total assets the firm managed at its peak.