The Hindu Business Line : Further consolidation seen in MFs

UTI'S acquisition of IL&FS Asset Management Company (AMC) is believed to be the beginning of a process of consolidation that the mutual fund (MF) industry is set to go through this year. With this deal, the industry scorecard shows a total of 30 asset management companies with assets under management (AuM) ranging from Rs 63 crore to Rs 20,000 crore.

Consolidation is the key word in the industry now and AMCs are looking to grow inorganically, both in terms of AuM and reach, said a senior fund manger with a leading MF.

Mr Sanjay Sachdev, Managing Director and CEO, Principal Asset Management Company, said: "We are consistently on the lookout for potential acquisitions. Smaller players will realise that it is in their interest to join hands with the industry bigwigs.

"Without a doubt, the UTI deal has created higher standards for everybody and the customers will get the message that they can expect more from the long term players."

Ms Kavita Hurry, Managing Director and CEO, ING Vysya Investment Management asserts that ING as a group is an acquirer. "The market will veer towards players for whom mutual funds is a core business. Ideally, there would be 15-20 players left in the industry once the consolidation phase is over."

Though industry leaders hailed the UTI, IL&FS AMC deal as a positive move, some of them said that large corpus sizes will be detrimental to the interest of the investors.

"AuM is the wrong parameter to base the success of a fund on. Value created to the customer on a long-term basis is crucial," said Mr Sachdev.

Mid-size funds are known to ensure better returns to investors. This will be more poignant when markets turn bearish, according to Ms Hurry.

Mr Hormuz Bulsara, COO, Tata TD Asset Management, summed up the mood of the industry by saying: "The UTI-IL&FS deal per se is not significant. What is significant is that the gaps between the players are growing rapidly." In an industry famous for its me-too attitude, this means that acquisitions will now be the flavour of the season.