BoB, BNP combine AMC biz: What’s in it for MF investors?

Kumar Shankar Roy |BL Research Bureau | Updated on: Mar 16, 2022
Suresh Soni, CEO of the merged entity; Sanjiv Chadha, Managing Director and CEO, Bank of Baroda; David Vaillant, Global Head of Finance, Strategy & Participations, BNP Paribas Asset Management (L to R)

Suresh Soni, CEO of the merged entity; Sanjiv Chadha, Managing Director and CEO, Bank of Baroda; David Vaillant, Global Head of Finance, Strategy & Participations, BNP Paribas Asset Management (L to R)

Given the move towards ETFs and index funds of late, it remains to be see how Baroda BNP Paribas MF plays the passive game

Bank of Baroda and BNP Paribas Asset Management have entered into a strategic partnership by combining the strengths of their respective asset management (AMC) businesses in India to form ‘Baroda BNP Paribas Mutual Fund’.

This merged entity will be closer to PPFAS MF and LIC MF in terms of assets under management (AUM), and still be around the middle in the 40+ fund-houses jostling for space in the Indian market. Average AUM for the quarter ended December 31, 2021 for Baroda Asset Management India was ₹12,769 crore and BNP Paribas Asset Management India was ₹9,116 crore.

The joint venture AMC will also provide offshore advisory services. If you take into account combined assets under management and advisory, the company is in charge of ₹22,522 crore assets. Bank of Baroda will have a 50.1 per cent stake in the AMC, while BNP Paribas Asset Management will hold the remaining 49.9 per cent stake. On October 11, 2019, Bank of Baroda had entered into binding transaction documents with BNP Paribas Asset Management Asia Limited for the merger of Baroda Asset Management India with BNP Paribas Asset Management India. There was no cash consideration in the transaction.

As per latest information, Baroda BNP Paribas Mutual Fund, led by CEO Suresh Soni, will offer over two dozen schemes across equity (10), hybrid (5) and debt (12) categories. Sanjay Chawla is the CIO Equity and Alok Sahoo is the Head – Fixed Income of the fund-house.

How funds have fared

The largest equity funds in Baroda BNP Paribas MF stable are Baroda BNP Paribas Large Cap, Baroda BNP Paribas Multi Cap, Baroda BNP Paribas Midcap and Baroda BNP Paribas Business Cycle. Baroda BNP Paribas Large Cap is a good fund with a long track-record, although its recent performance hasn't been exactly stellar. The absence of passive equity funds in the mix may be a result of strategic thinking, but given the move towards ETFs and index funds of late, it remains to be see how Baroda BNP Paribas MF plays the passive game. We notice that BNP's in-house equity investment framework BMV (Business - Management - Valuation) has been retained for Baroda BNP Paribas MF.

On the debt side, Baroda BNP Paribas Liquid is the only large fund, with the rest of them being sub-₹200 crore schemes. Baroda BNP Paribas Credit Risk, despite its small size, has done quite well in the last one year. On the hybrid side, Baroda BNP Paribas Balanced Advantage is a reasonably-run fund. Most of the offerings in Baroda BNP hybrid basket do not have a long record.

Takeaways for investors

From an investor perspective, the coming together of BoB and BNP will means 3 key things. One, the fund-house will have access to investment expertise and legacy with 300 years of cumulative experience between them. Two, investors will get more touchpoints as the MF will have representatives in 90 cities & towns across India. Three, given BNP’s global AMC expertise, innovative offerings could be launched in future for Indian investors.

It is no secret that both Baroda MF and BNP MF, on a standalone basis, could not become a major player; they have remained fringe players at best. So, there are hopes that the combined entity will be more potent in nature. Lastly, the MF industry is all about scale, not just the synergies and operational efficiencies of a combined MF. Given the tough competition in the space, it remains to be seen whether the merger will ultimately help the entity move up the ranks and become a big player to reckon with. The captive BoB customer base can provide a huge runway for growth if execution is right.

Published on March 16, 2022
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