Mumbai: India’s largest mutual fund house by assets, Reliance Capital Asset Management Ltd, or RCAM, part of the Reliance Anil Dhirubhai Ambani Group, or R-Adag, is branching out to foreign markets, riding on New York-based strategic stakeholder Eton Park Capital Management Llc.
Branching out: Vikrant Gugnani, chief executive, RCAM.
An arm of the publicly traded Reliance Capital Ltd, RCAM is looking to start operations in the US, the UK, Hong Kong, Malaysia and Indonesia within the next two years.
“We will initially sell India-focused products, since we have the expertise,” said Vikrant Gugnani, chief executive of RCAM. The second step, he said, will be “to offer local asset management services in these markets”.
As a first step, RCAM will launch offshore hedge funds from these markets, which will invest in Indian equities, Gugnani said in an interview.
Hedge fund group Eton Park, which manages more than $10 billion assets, had acquired a strategic 5% stake in RCAM at the end of 2007 for about Rs500 crore. “We will use Eton’s network to raise funds and start operations in developed markets,” said Gugnani.
RCAM has already received a licence to set up operations in the UK. In markets such as the US and the UK, where there are already many India-focused offshore funds, RCAM will also double up as portfolio adviser to foreign institutional investors, he added.
RCAM has started operations in Singapore, Dubai and Mauritius, and currently runs two offshore hedge funds: The India Equity Growth Fund based in Singapore manages some $260 million in local equities; Emergent India Fund, a relatively smaller hedge fund, is domiciled in the tax haven Mauritius.
Both these funds are not registered as foreign institutional investors with Securities and Exchange Board of India. They trade on Indian stocks through participatory notes issued by foreign brokerages operating in India, said Gugnani.
Participatory notes are offshore derivative instruments with an underlying link to a stock or stock index.
RCAM will also sell these existing offshore products in the markets where it plans to start operations.
RCAM is now ranked around 250th among global asset managers. It manages some $20 billion in Indian assets, significantly higher than those of its two immediate competitors — HDFC Asset Management Co. Ltd and ICICI Prudential Asset Management Co. Ltd, each of which manages under $12 billion in assets.
As of end-August, there were 36 asset management companies in India, with combined assets worth $120 billion.
For many top global players, net assets under management runs into trillions of dollars. Fidelity International, one of the world’s largest asset management company, has more than $1.5 trillion in assets.
Many large global investment management houses, however, calculate their net assets as the sum of assets managed across verticals such as asset management, life insurance, private equity and alternative assets, among others.
RCAM aims to become one of the top 100 asset managers of the world in the next five years, said Gugnani.
Some of the larger markets in Asia, such as South Korea, are extremely competitive and the margins are low, Gugnani said, explaining the rationale of initially targeting Hong Kong, Malaysia and Indonesia.
Fairly large fund houses from other Asian countries, such as Seoul-headquartered Mirae Asset Financial Group, which manages $121 billion, and Singapore state-owned investment firm Temasek, have already set up local mutual fund services in India.
RCAM also plans to continue with its domestic, retail-investor focused strategy. Despite a continued slump in equity markets and a near 28% fall so far this year in the benchmark Bombay Stock Exchange index, the Sensex, RCAM typically adds 150,000 customers a month, said Gugnani.
The firm also plans a significant expansion in its retail infrastructure. According to Gugnani, the number of retail outlets will more than double from the existing 185-odd stores to about 450 by March.
R-Adag has a strong retail network across India, through which it promotes products and offerings of group companies such as Reliance Money Ltd, Reliance Entertainment Ltd and Reliance Communications Ltd.