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Nilanjan Dey

Due to lack of many options, preference for standalone funds

Kolkata , Nov. 24

Funds of funds continue to face an uphill task in India, a trend reflected in the tardy growth in their assets under management (AUM).

At last count, as of October-end, the assets amounted to Rs 1,966 crore, just a fraction of the Rs 3 lakh crore managed by the mutual funds industry.

Funds of funds, a relatively new category in the country, have to contend with what appears to be a combination of several factors: a general tendency to invest in standalone funds, not more than a handful of players to offer these products and a certain inertia on the part of distributors to sell.

While mutual fund sources said that there are obvious signs of change, others underscore the single most important reason that keeps their AUM low - a lack of perception.

The latter, despite all the awareness that seems to be setting in, is currently seen as the biggest stumbling block for the segment.

These funds, according to data released by AMFI, managed Rs 1,669 crore at the August-end.

This inched up marginally to Rs 1,673 crore by the close of September. The fund industry's total AUM (excluding fund of fund assets) stood at Rs 3.06 lakh crore and Rs 3.09 lakh crore respectively for these two months.

Fund of fund providers agree that they have serious issues to grapple with. Mr Sumeet Vaid, Chief Marketing Officer of OptiMix, sought to rationalise the situation by saying that investors need to view a multi-manager approach in the context of value addition.

"Asset allocation can become easier if a fund of fund is chosen. This is especially relevant for an investor who has little or limited access to active advice."

He added that the idea is beginning to appeal to financial advisors in a better manner. "The situation may turn for the better if more products are made available."

OptiMix, which specialises in multi-manager products, is a division of ING Investment Management.

The latest tally includes assets managed by some of the bigger fund of fund providers such as Franklin Templeton MF (Rs 349 crore), ABN AMRO MF (Rs 181 crore) and Kotak Mahindra MF (Rs 769 crore, including close-ended funds).

There are smaller players like Prudential ICICI MF and Standard Chartered MF as well, with Rs 41 crore and Rs 17 crore respectively.

OptiMix ties up with Karma Cap, Religare

OptiMix has tied up with Karma Capital, a boutique investment management outfit, and Religare, a securities broking company, for sourcing key services.

"We have been talking to a range of firms. Generally, we see a significant scope for boutique investment managers, many of which have been founded by people who had earlier worked for funds or brokers, in this context," said Mr Vaid.

Religare Securities is part of Ranbaxy, the pharmaceutical major, while Karma Capital is associated with Mr Rushabh Sheth, a former CIO of Kotak Mahindra MF.

More Stories on : Mutual Funds | Asset Management Companies

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