More bailout buys likely in mutual funds

More bailout buys likely in mutual funds

New Delhi: Reeling under liquidity pressure, the mutual fund industry could see more bailout deals—similar to the takeover of Lotus India Asset Management Co. Pvt. Ltd—say industry experts.

“One or two more such kind of transactions may be seen in days ahead but that will mainly be for bailing out some problem-ridden fund houses," mutual fund tracking firm Value Research India Pvt. Ltd’s chief executive officer Dhirendra Kumar said.

Last week, integrated financial services group Religare Enterprises Ltd announced the acquisition of Lotus India Asset Management, with an asset size of about Rs5,000 crore.

According to industry sources, the Indian asset management arm of the crisis-ridden American International Group Inc. (AIG), AIG Global Investment Group Mutual Fund, which saw a fall of over Rs1,000 crore in assets in October, is up for sale.

More foreign fund houses are also expected to wind up their businesses in the near future because of losses on account of the sharp meltdown of the markets with the Bombay Stock Exchange’s benchmark Sensex plunging below 10,000 points from over 21,000 in January.

Value Research’s Kumar said, “The outlook for the mutual funds industry remains grim for the next two years and fixed-income plans would come under pressure. The days ahead will also see mutual funds reinventing themselves to be more focused on retail investors."

According to Taurus Mutual Fund director R.K. Gupta, some consolidation can happen in the coming days in the industry.

The mutual fund industry has been under pressure for last two quarters. The industry saw an 18% decline in its assets under management, which plunged below the Rs5 trillion mark in October for the first time this year.