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Marriages & Break-ups

While Pioneer Investments joins hands with BoB AMC, some other partnerships have broken up

Public sector owned asset management companies (AMCs) are set to give the private players a run for their money. Not too long ago, we had Canbank Mutual Fund renamed as Canara Robeco Mutual Fund after the Netherlands-based Robeco group acquired a 49 per cent stake in the AMC.

Now the Securities & Exchange Board of India (SEBI) has granted permission to Pioneer Global Asset Management (Pioneer Investments) to start mutual fund operations in India in collaboration with BoB AMC.

Pioneer is certainly not new to this game or this country. It was India's first private sector mutual fund way back in the nineties. Pioneer had tied up with Chennai-based Kothari Sugars & Chemicals to enter the fund management business in India. The highly successful AMC was sold to Franklin Templeton in 2002 and Pioneer exited the market. This happened soon after UniCredit of Italy acquired Pioneer Investments in the U.S. In retrospect, they obviously view that move as a mistake and are now re-entering the market. With Pioneer acquiring a 51 per cent stake in BoB AMC, the new venture will now be renamed as Baroda Pioneer AMC Ltd.

While Pioneer has a successful track record, the same cannot be said for BoB Mutual Fund. In the 16 years of its existence, to say that it has been a mediocre player, is probably being rather gracious. Extremely small in size, it currently manages just Rs 59.54 crore (June 2008). It however makes an interesting marriage of convenience. Pioneer Investments will be able to tap into the wide customer base of Bank of Baroda, spread across more than 2,800 branches in India, whereas BoB Mutual Fund would do well to make benefit from 80 years of global experience brought in by Pioneer.

Not to be left out, LIC Mutual Fund has also been looking at a strategic partnership with an overseas financial firm. In July 2008, the Nomura group signed a non-binding memorandum of understanding (MoU) with Life Insurance Corporation to explore the possibility of expanding ties. This is probably the first step towards the Japanese financial services major acquiring a stake in the fund business.

This trend leaves UTI AMC as the only public sector mutual fund. But UTI AMC is not even considering a foreign partnership. Instead, it wants to set the record as being the country's first fund house planning to go public. Unfortunately, the volatile and unpredictable market does not provide the best environment for it and the AMC has been forced to defer its Initial Public Offering (IPO).

There's action amidst the other players too. Earlier this year, Infrastructure Development Finance Corporation (IDFC) acquired Standard Chartered Mutual Fund. While Axis Bank has obtained RBI approval to set up an AMC and is awaiting SEBI approval. JP Morgan, American International Group (AIG), AXA Investment and Korea's Mirae Asset Group all came to India over the past year. Now we have Union Bank of India, Religare Enterprises, Edelweiss, Indiabulls Financial Services, Bank of India and India Infoline as some of the new players to watch out for (though only a few of them have currently got past the SEBI approval stage).

Meanwhile, it is not all about partnerships and new entrants. There are break-ups too. Punjab National Bank has decided to exit Principal AMC. The reason given by PNB Chairman & MD K C Chakrabarty in the press was that "they were not performing well at all, so we decided to sever all ties with them." Both the entities are currently said to be negotiating the exit price.