History of private mutual funds in India

With over Rs 7,500 crore worth of monthly inflows in an industry with assets worth Rs 23 trillion, the Indian mutual fund industry seems like a juggernaut. It's hard to imagine that the seeds of India's Rs 23 trillion mutual fund industry were planted over drinks and dinner in the lawns of a plush bungalow in Nungambakkam, Chennai. It was 1992. The Indian economy had just been opened up. The Narasimha Rao government allowed private sector into the mutual fund industry in its historic Union budget of 1991-92. Before this, all fund houses were sponsored by state-owned firms, with the Unit Trust of India being an overwhelming market leader. It was in this setting in Chennai, Vivek Reddy-who had just returned from the US after his education and a small stint in a consultancy firm -got together with his childhood friend Shyam Kothari and convinced him to open a mutual fund. Kothari came from an industrialist family that had owned a non-banking finance company called Investment Trust of India (ITI). Kothari agreed instantly. Just as they were laying the groundwork, John Francis Cogan Jr., who was the chief executive officer and president of Pioneer Group Inc. US, came visiting. The Pioneer Group wanted to enter the Indian mutual fund industry and was scouting for Indian partners. Cogan Jr met Reddy and Kothari at Kothari's Nungambakkam home for a meeting that turned into a casual evening chat that went on till midnight. Cogan, who had come with his friend and fellow Harvard University classmate Jaskaran Teja, were taken in by Reddy and Kothari, both of whom had just turned 30. Cogan and Teja were in their 60s at the time. The deal, as they say, was done and Kothari Pioneer Asset Management Co. Ltd launched its first two schemes on 1 November 1993, just five days short of Reddy's 31st birthday. So, Kothari Pioneer Bluechip Fund and Kothari Pioneer Prima Fund were India's first private sector mutual funds schemes. In the beginning Reddy wanted to do things differently. Until then, fund houses used to disclose net asset values (NAV) once a month. Kothari Pioneer became the first fund to disclose the NAV daily. One Mumbai-based employee, Rajendra Mukadam, used to run to the BSE Ltd every day with a floppy disk, get the stock price data

This article was originally published on September 08, 2018.