Mumbai: The Indian fund arm of Morgan Stanley announced the launch of its second domestic fund, marking plans to expand in the country’s fast growing fund industry after a gap of about 14 years.
The Morgan Stanley ACE Fund, an open-end multi-cap equity scheme open for subscription from 11 February, joins the Rs3,700 crore close-end Morgan Stanley Growth Fund, which the firm launched way back in January 1994.
“We have missed a step. But we do not think of it as a five-year kind of market but we think of it as a 30-year-plus kind of market...we are one of the early ones,” N. Ramachandran, chief executive of Morgan Stanley Investment Management, said. The growth fund, which the firm now plans to convert into an open-end fund, was a rage among investors in 1994 as the first offering from a foreign fund house.
But the fund hit a rough patch soon after launch and its net asset value collapsed to Rs6.74 by end-1996. It has recovered since then and has delivered 17.43% annual return since launch, data from fund tracker Icra Ltd showed.
Ramachandran said his firm was not sure about the potential of Indian fund market in the last decade, adding that most of the growth for the industry had come in the last few years. “There is now a significant retail interest in mutual funds and Morgan Stanley hopes to become one of the preferred mutual fund choices for investors over time.”
India’s five-year bull run, backed by record fund inflows and strong corporate earnings, has led retail investors to invest about 4.8% of their household savings into funds in 2006-07, up from 0.4% two years earlier, central bank data shows.
In September last year, Morgan Stanley had hinted at plans to expand in India.
In December, the firm hired Jayesh Gandhi and Navneet Munot from Birla Sunlife Asset Management to oversee multi-cap equity and multi-strategy schemes respectively.
India’s 33-member and rapidly growing Rs5.5 trillion domestic fund industry—led by Reliance Capital Ltd and ICICI Prudential Ltd—has seen assets surge 63% in the last one year, a rate of growth that has attracted many global players.
Foreign asset managers such as American International Group Inc. and JPMorgan started India operations last year, while BlackRock Inc. said last month it will buy a 40% stake in India’s DSP Merrill Lynch Fund Managers Ltd.
Pioneer Global Investments Ltd, a unit of Italy’s biggest bank UniCredit, also said it would re-enter the Indian fund industry after an absence of nearly five years.
India’s benchmark index, the Sensex, rose about 47% last year to record its sixth straight year of gain and also its strongest growth in four years, though it has been in a skid in much of 2008.