Avoid disruption
Sanjay Kr Singh: Nov 10 2008, 12:08 IST
By being diligent at the time of buying the fund, you can avoid the disruption that mergers and acquisitions of mutual funds can cause to your investments
At the beginning of last week came the news that Lotus India Asset Management Company (AMC), a young fund house, was being taken over by Religare Aegon AMC, a new entrant. Several reasons are being attributed for Lotus India AMC’s sellout. According to industry insiders, its Singapore-based promoters — Fullerton Fund Management Group and Sabre Capital Worldwide — were facing liquidity pressure in their own markets and were unwilling to inject further capital into their Indian venture. Two, Lotus India had become primarily a debt fund house: more than 90 per cent of its assets under management (AUM) came from debt products, which are low-margin products. So the entity wasn’t making much money. And three, the last straw was the heavy redemption pressure faced by the fund house in its liquid funds and fixed maturity plans (FMPs) in recent weeks leading to its AUM almost halving from its peak of around Rs 11,000 crore to around Rs 5,457 crore now.
At the beginning of last week came the news that Lotus India Asset Management Company (AMC), a young fund house, was being taken over by Religare Aegon AMC, a new entrant. Several reasons are being attributed for Lotus India AMC’s sellout. According to industry insiders, its Singapore-based promoters — Fullerton Fund Management Group and Sabre Capital Worldwide — were facing liquidity pressure in their own markets and were unwilling to inject further capital into their Indian venture. Two, Lotus India had become primarily a debt fund house: more than 90 per cent of its assets under management (AUM) came from debt products, which are low-margin products. So the entity wasn’t making much money. And three, the last straw was the heavy redemption pressure faced by the fund house in its liquid funds and fixed maturity plans (FMPs) in recent weeks leading to its AUM almost halving from its peak of around Rs 11,000 crore to around Rs 5,457 crore now.
Earlier M&As
This takeover of Lotus India AMC by Religare Aegon is not the first instance of acquisition in the Indian mutual fund industry and will certainly not be the last. Experts, in fact, see this takeover as the beginning of a trend. Recently, Stanchart AMC was acquired by IDFC and ABN Amro by Fortis.
According to Prasun Mukherjee, a Kolkata-based mutual fund analyst, “As the
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