As it turns out, not all foreign fund houses want to leave India. A few months after Fidelity decided to pack its bags, Schroders Singapore Holdings Pvt. Ltd, a wholly owned subsidiary of Schroders Plc, a UK-based asset management company (AMC), acquired a 25% stake in Axis Asset Management Co. Ltd.
If you’re an investor in Axis AMC, life goes on as usual for now. But there are benefits coming your way soon. Also, you need to know about the new company.
Who is Schroders?
Schroders is a UK-based fund house that has operations the world over. Though UK-based, around 70% of its revenues come from its international operations. Schroders’ deal with Axis AMC is not its first venture in Asia.
Illustration by Shyamal Banerjee/Mint
The fund house is present in countries including China, Singapore, Hong Kong, apart from Australia; it has been present in Asia since the past 50 years and manages assets worth $80 billion, apart from $7 billion worth of assets of its China-based clients. Globally it manages assets worth £187.3 billion as on 31 December 2011. Back home in UK, it is listed on the London Stock Exchange and is a part of the FTSE 100 index.
Schroders takes its name from its German founders, the Schroders family. Founded in the early 1800s, it is a 200-year-old institution. Over the last century, Schroder has been into commercial banking, investment banking and merchant banking. Eventually it got out of its commercial and investment banking space and turned its focus to its asset management business the world over. It manages equity and fixed income funds in addition to property investments and alternate funds such as commodities.
As part of this deal, one member (Lester Gray, chief executive officer, Schroder’s Asia-Pacific region) will be on the AMC’s board of directors and one member (Murray Coble; chief operating officer, Schroder’s Asia-Pacific region) will be on the board of trustees of Axis AMC.
The Axis journey
Launched in October 2009, Axis AMC is one of India’s fastest growing fund houses. In just under three years, it has grown to become India’s 15th largest fund house. So far, a significant chunk of its revenues come from Axis Bank Ltd’s clients (its sponsor). As per disclosures made on its website, roughly 66.50% of commissions that Axis AMC paid to all major distributors in FY11 went to just one entity—Axis Bank.
When Axis AMC launched its operations in 2009 with its first equity scheme, Axis Equity Fund, it collected Rs 909 crore during its new fund offer (NFO) period. Of this, Axis Bank mobilized around Rs 700 crore or 75-80% of the amount. Out of 138,000 investors of Axis Equity Fund, 95,000 came through the bank’s network.
But Rajiv Anand, chief executive officer, Axis AMC, says that the MF is slowly finding favour from other distribution segments, too, such as banks, national distributors and independent financial advisers (IFAs). “We have made fairly strong inroads in most other distribution segments and have built on our foundation from a local perspective,” he says.
Having put “the local perspective on track”, Axis is now turning its gaze to foreign markets and here’s where Schroders come in. Once the deal gets regulatory approval, Schroders can launch India-specific MF schemes in the countries it operates in, solicit money from investors residing there and give the money to Axis AMC’s fund managers to manage. In return, Axis AMC can launch fund of funds (FoF) that will invest in foreign funds that Schroders manage.
What about existing investors?
There is no change for existing investors of Axis MF’s schemes. The names of the schemes, its management and their styles will continue to remain the same.
Many times, when an international firm acquires a stake in an Indian firm, it usually leads to an improvement in performance as well as its processes. When French asset management firm Societe Generale (now Amundi Asset Management) acquired a 33% stake in SBI Funds Management Co. Ltd in July 2004, the latter’s performance improved; its mid-cap schemes were among the top performing schemes between 2004 and 2007. When Robeco, a Netherlands-based AMC acquired a 49% stake in Canbank AMC (now Canara Robeco AMC), the sleepy fund house hired new fund managers, revamped its process and turned around its performance.
Though Axis AMC’s condition so far cannot really be compared with what SBI and Canara Robeco AMCs were before their stake sales, an entry of a global company into its equations adds muscle. According to global mutual fund tracker, Morningstar, one of Schroder’s investor-friendly trait is that the fund managers’ remuneration is based on the performance of their funds over one- and three-year periods, while analysts’ compensation is determined by their stock price targets, which serves to tie the fortunes of the investment team to those of investors.
Expect more schemes from Axis AMC, especially those that will invest your money across countries and markets.
Way forward for Schroders in India
This is not Schroders’ first attempt to penetrate the Indian markets. The fund house has been trying to enter India for the past seven years. Initially it had appointed S.V. Prasad (erstwhile head of Zurich India Asset Management Co. Ltd—which was eventually acquired by HDFC Asset Management Co. Ltd—and later head of Birla Sun Life Asset Management) to spearhead its AMC business in India. After regulatory changes—chiefly the abolition of entry loads in August 2009—and the markets crash of 2008, Schroders abandoned its plans to set up a wholly owned subsidiary and instead opted to acquire a stake in an existing Indian asset management firm.
“The only credible way of entering the Indian market was with a strong local partner. As a foreign fund house trying to enter the market entirely independently and then to establish relationships with distributors was a significant hurdle,” says Gray of Schroders’ Asia-Pacific region.
Gray added though that Schroders is open to increasing a stake in Axis AMC going ahead. “I am sure that as we go forward, both firms’ shareholders could potentially have a conversation in terms of Schroders increasing sake in Axis AMC as they get to know each other better…” That’s a possibility given how Schroders entered other markets before. In Australia, Singapore and Hong Kong, for instance, Schroders started off by acquiring a stake in local asset management firms and later acquired them wholly.