On 8 March 2016, LIC Nomura Mutual Fund Asset Management Co. Ltd announced to its unitholders that the shareholding pattern of the fund house and its trustee company will change. Back in 2009, Nomura Asset Management Strategic Partners Pte Ltd had purchased 35% stake in LIC Mutual Fund. And now, it will exit the fund house and the trustee company. LIC Housing Finance Ltd—an existing shareholder of the asset management company (AMC)—will increase its stake from 20% to 39.3%. Corporation Bank and GIC Housing Finance Ltd will be the new shareholders.
Just like foreign firms exit from their India partnerships, they also come in and pick up stakes in Indian fund houses. What happens when a foreign company picks up stake in an Indian fund house? As a mutual fund (MF) investor in the Indian firm, does it matter?
PORTFOLIO MANAGEMENT
As an MF investor, what matters to you is how much returns your fund house gives you. While your fund manager’s expertise will help identify the right stock or sector, the MF’s processes aim to put in a method to this, to ensure performances are measured and not just one-off.
When Robeco Groep N.V. (a fund house based in the Netherlands) picked up 49% stake in Canara Mutual Fund in 2007, it brought changes in the way that fund managers picked stocks. In India, equity funds can invest up to 10% of their corpus in a single scrip. Robeco set limits that a fund manager could not pick stocks more than 5% of its weight in the underlying benchmark index. So, if a stock constitutes 2% in the benchmark index, Canara Robeco fund managers cannot invest more than 7% of corpus in it. Also, not more than 20% of the portfolio can take beyond 90 days to get liquidated.
Another change that can happen is the launch of new schemes. Since global fund houses can invest in a wider variety of instruments and sectors, the new partnership in India can launch schemes here that collect your money and invest abroad. For example, after Invesco, a US-based fund house, picked up a 49% stake in Religare Asset Management Co. Ltd in 2013, the domestic AMC launched schemes here that invest in two of Invesco’s international schemes; one that invest in global equities and the other in European stocks.
