Saeed Azhar, Reuters
Singapore: Lotus India Asset Management, a Mumbai-based mutual fund group, expects funds under management to nearly treble to $2 billion (Rs8,112 crore) in the next 10 months as it targets Indian retail investors, an executive said on Thursday.
Lotus is a joint venture between Fullerton Fund Management, a unit of Singapore’s state investor Temasek Holdings, and London-based Sabre Capital Worldwide, which was founded by former Standard Chartered chief executive Rana Talwar.
The group has launched seven mutual funds, raising $700 million, since November 2006 and plans to launch 10 to 12 more funds.
“India is a very underserved, very underpenetrated market for mutual funds,” Ajay Bagga, chief executive, told Reuters in an interview during a visit to Singapore.
“Out of every $100 that the Indian household saves, about $46 goes into bank fixed deposits, about $9 is held in cash,” while barely 4% goes into stocks or bonds, Bagga said. The remainder is divided equally between provident funds, insurance and post office savings, he said.
By comparison, in a more developed market like the United States, Bagga estimated that 14% to 16% of retail money goes into the capital markets.
Indian mutual funds had total assets of Rs3.5 trillion ($86 billion) in April, up 36% from a year earlier, according to data from the Association of Mutual Funds in India.
Bagga, who previously worked at Citibank and GE Capital in India, said growth was likely to come from retail investors, thanks to higher savings, and from the pension industry as the government opens up the sector to fund managers.
Most of the money currently managed by Lotus comes from financial institutions, companies and small businesses. The firm has offices in 50 Indian cities, and its products are sold through 7,600 third-party distributors across the country.
Bagga said he expected three state-owned fund managers including Unit Trust of India, the country’s biggest mutual fund manager, to manage some of the pension funds’ money in the first phase of industry reforms.
“We expect over time there will be more liberalisation and other private players will also be allowed to manage these assets,” Bagga said.
Australia’s $900 billion fund industry has been bolstered by the country’s mandatory superannuation pension scheme, as employers must put 9 percent of an employee’s salary into a pension fund each year. Employees are free to select the funds.
“We have seen that in the U.S. and we have seen that in the Australian market that following the reforms... the managed assets tend to take off. The same will happen in India,” Bagga said.