Pramerica India fund arm eyes $3.2 bn by 2015

Pramerica India fund arm eyes $3.2 bn by 2015

Mumbai: Pramerica, the latest in a series of new foreign money managers to set up shop in India, hopes to manage Rs150 billion ($3.2 billion) by 2015, helping it break even in the fiercely competitive domestic fund market, a top executive said.

Rapidly growing wealth and the booming economy coupled with low penetration of financial products bode well for asset management firms in the country, said Vijai Mantri, chief executive of Pramerica Asset Management, the Indian arm of US firm Prudential Financial. “This is a market for the next 50 years," Mantri, who earlier headed the Indian fund arm of Deutsche Bank, told Reuters in an interview.

“If you look at what will happen 20 years down the line, every third wealthy guy will be from India and China. So I think statistics speak for itself," he added.

Pramerica, which has presence across major Asian fund markets such as Japan, South Korea, China and Taiwan, received regulatory approval last month to launch mutual funds in India.

India is seen as a powerful long-term lure for global money mangers who are lining up to start operations with its large population, a booming stock market, rising income level and a savings rate of more than 30%.

Opportunities still exists with less than 10% of India’s household savings invested in mutual funds and limited reach of the country’s Rs7.4-trillion funds industry with top-8 cities contributing over three quarters of its assets.

Pramerica is preparing to offer its first fund early next month, and expand it to six products in the next two years.

It joins the likes of Italian bank UniCredit’s arm — Pioneer Global, South Korea’s Mirae Asset and France’s Axa, who have started operations in the domestic funds market over the last three years.

More than 20 firms, including German firm Allianz, BNY Mellon Asset, a unit of the world’s top custodian, Bank of New York Mellon, and South African financial services firm Sanlam, are considering an entry.

Challenges and competition

A raft of regulatory tweaks, including a ban on entry fees charged by funds from August, which cuts firms’ ability to pay advisors and makes it even tougher to tap clients in smaller cities are also a challenge for new entrants.

Mantri said his firm was mindful of the stiff competition and willing to invest and wait.

Pramerica’s promoters “understand that in a fiercely competitive market like India where there are 40 asset management companies and more to come by, they are not going to make money overnight," the Mumbai-based executive said.

Pramerica has a team of about 50 staff, including the investment management team of nine. The firm plans to double headcount in the next two years.

Its head of equity Ravi Gopalakrishnan is a former fund manager of the Indian fund arm of US insurer and asset manager Principal, while Pramerica’s head of fixed income Mahendra Jajoo has come from Tata Mutual Fund.

The firm operates from eight branches and plans to expand presence to 25 locations by the end of the year, Mantri said.