The Hindu Business Line : Asset base - still small in global compass

Last week, index services provider Standard & Poor's announced that, based on preliminary reporting, the S&P 500 closed at an all-time high, signalling a "full recovery" for the US market from its October 2002 lows. The index closed at an imposing 1,530.23, surpassing its earlier all-time high of 1,527.46 achieved on March 24, 2000.

If that does not impress you, read on. With $1.3 trillion directly invested and another $4.8 trillion benchmarked to it, the S&P 500 is the world's most followed stock market index. It is extremely popular and money managers refer to it every now and then. Clearly, size is something that is not alien to the world of S&P 500. Check out some of the large index funds that mirror it - the result will no doubt surprise you.

Cut to India, especially to such things as the size of the market and, more specifically, the size of the funds that operate in it. Reliance Mutual Fund, as everybody knows by now, is the No 1 player in the local asset management industry, having beaten the public-sector giant UTI Mutual Fund and the private-sector leader ICICI Prudential Mutual.

How much does new No 1 command? The figure hovers just around Rs 50,000 crore. In fact, take away the assets managed by the top five players and you will be left with a paltry figure that the rest of the gang share between themselves.

We are surely not comparing apples with apples here, but the largest Indian fund houses do look like midgets when viewed against so many of their foreign peers.

Global assets grow

While we are on the subject of size, consider a recent report done by Pensions & Investments, which pegs worldwide institutional assets of the 500 largest players at $25 trillion or so. This is a straight 14.3 per cent increase, courtesy pulsating equity (and real estate) markets.

Pension consultants said institutional money continued to pour into alternative strategies in 2006, including hedge funds, private equity and real estate, while demand for international and global equity strategies remained high as well.

How are the rankings this year? Boston-based State Street Global Advisors remained at the top with $1.69 trillion in total worldwide institutional assets, up almost 21 per cent. SSgA was followed once more by Barclays Global Investors, up 16 per cent to $1.46 trillion. At the third place was Fidelity, up 11 per cent to $930 billion. These numbers do not mean a thing in the Indian context, you may argue. That's not untrue, we agree. However, let us still refer to some broad trends that the report outlined:

There was a certain amount of industry consolidation all around the world.

The domain of `alternatives' expanded, thanks to hedge funds, international equities and more. Together, these were billed as the "top targets for new money last year".

On the indexing side, there were interesting developments, with demand for new indexes that look to exploit specifics such as small-cap premium.

As we end, we will leave you with another tidbit, this one concerning the largest hedge funds and absolute-return managers. Assets under management of the top 25 hedge fund managers as of December 31 last year rose $98 billion (30 per cent) to $420 billion compared with year-end 2005.

Feedback may be sent to nilanjan@thehindu.co.in

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