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ITC-Threadneedle, 20th Century MF in talks to merge local AMCs
Rajita Bansal
MUMBAI, January 4: ITC-Threadneedle and 20th Century Mutual Fund are in talks to merge their asset management companies (AMCs) in the country. The merger moves follow a clutch of global acquisitions and investments by the Zurich group, Switzerland's largest insurance conglomerate, which has acquired Threadneedle from BAT abroad as well as Kemper Investments, which has a 64 per cent stake in 20th Century AMC.ITC-Threadneedle AMC Ltd and 20th Century AMC have already initiated discussions on how to morph the international developments in domestic terms. The final merger may, however, take place only by the middle of 1998. Apart from the two AMCs, there is a strong possibility that the AMC wing of Peregrine Capital India Pvt Ltd may also be associated with the merged entity. Zurich Group has already formed a new entity called Scudder Kemper Invest to act as the holding company for its asset management business. The Scudder part of the name was acquired in June 1997 when the group bought over the asset
management and mutual fund company Scudder, Stevens & Clark. The proposed mergers are a result of Kemper's stake of 64 per cent stake in 20th Century Finance and Threadneedle's 50:50 joint venture with ITC Classic in ITC-Threadneedle. Since Zurich Group has only picked up a 24 per cent stake in Peregrine, it is not still clear as to how the domestic operations of Peregrine can be linked with that of ITC-Threadneedle and 20th Century. It is also not clear as to what will happen to the stakeholding of the Indian partners in the new entity. Under the terms of the ITC Classic-ICICI merger, the former's 50 per cent stake in ITC Threadneedle is to revert to ITC. As for the business worth of the new entity in the country, ITC-Threadneedle has done two schemes worth around Rs 65 crore while 20th Century has asset funds of nearly Rs 45 crore. Peregrine is yet to open its account in India despite having Sebi clearance for its AMC. The coming together of three multinational AMCs could accentuate the trend towards
consolidation in the domestic asset management industry. Given the poor performance of most funds, observers predict a shakeout on the lines of the broking industry since the asset management business requires heavy investment and has a long gestation period, thereby making it impossible for small operations to stay afloat. The first indication of a shakeout surfaced last month when the AMCs of the HB and CreditCapital groups merged to stay afloat. However, among the three asset-management companies bought over by Zurich Group, none has managed to establish a strong brand in the country as yet. The asset-management companies, however, are confident that investment in equities by individuals will pick up soon just as it did in the United States in the eighties and is doing so today in the United Kingdom. On the other hand, Asset management companies like Templeton are meanwhile working on establishing a viable distribution network and educating the investor on the pluses of long-term equity investments
compared to other savings schemes through elaborate advertisements.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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