What option does a fund house have when it has its back to the wall? Obviously, sell out. That's exactly what the erstwhile heavyweight, GIC Mutual Fund (GICMF), is planning to do. The reason is that the AMC's parent, the public sector re-insurer, General Insurance Corporation, believes that fund management business doesn't fall in line with its core activity. That explains why GICMF has closed down some of it branch offices recently.
GICMF is a 60:40 joint venture between General Insurance Corporation (GIC), its four subsidiaries and Soros Fund Management of the US. As on June 30, 2003, the AMC managed a paltry Rs 177 crore worth of assets spread across four equity funds (including a balanced fund), four fixed income and two closed-end tax-saving schemes.
The sluggish pace at which this AMC has progressed in the last five years makes selling out perhaps the best available option. GICMF started off on its own as an equity fund house with closed-end equity schemes in 1993, garnering a sizeable asset base. As these funds came up for redemption in the late 1990s, the fund house shrank in size. Meanwhile, in 1997, Soros Fund Management through SC Management Co. came on board as GICMF's JV partner. This change hardly imp-roved the AMC's position in the industry. It was only in 2002 that GICMF launched its fixed income funds.
Thus, while its rivals, PSU bank and financial institution-sponsored AMCs and other private players, have grown with a sharp rise in their debt fund assets, this AMC has lagged behind.
This lack of interest perhaps stems from the fact that the Indian promoters' core business activity is general life insurance. Besides, non-profitability of the AMC is what could disinterest the promoters. For the financial year-ended March 2002, GICMF had incurred a Rs 26.42-crore loss. Thus, for investors it's time to reconsider their investments here.
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