The current crisis in the global and Indian financial markets has taken a toll on the Indian mutual funds industry and a major shake out of operations is expected. The toll for foreign fund houses is expected to be more severe as they have witnessed massive erosion in the assets under management (AUM) numbers.
For the month of October, all the top seven major losers are foreign fund houses including one domestic fund house with a foreign tie-up. According to Association of Mutual Funds in India (Amfi), the AUM of the foreign fund houses eroded more than the domestic fund houses in October. The Mirae Mutual Fund was hit the most. Its AUM dipped by 56% or Rs 1,305.64 crore at Rs 2309.82 crore in October. Another foreign fund house ING Mutual Fund has also come under the trap of market meltdown. The AUM of the fund house dipped by 33.17% or Rs 2,089 crore to touch Rs 6,298 crore, in the month of October.
Religare Enterprises has announced the acquisition of Lotus India MF. Though the discussions were on for a long time, the falling AUM trend seems to have accelerated the pace of decision making said a source close to the development.
Mutual fund houses run their operations based on expenses charged from the assets managed by the funds and also the loads. With the AUM numbers dipping and new fund offers drying up, sustaining mutual fund operations is going to get difficult. A consolidation is therefore round the corner, reckon experts. The clear targets will be the small sized funds.
Already AIG Global Investments has witnessed a 44% AUM erosion in a month as they dipped by Rs 1,336 crore in October. There have been reports that the AIG management, facing big problems overseas is a willing seller in the market. At the same time, there are players like Aviva and Allianz, who are on the look out for picking up such distressed asset management companies.
Moreover, a rescaling of salaries, bonuses and even operations is just round the corner. ?The industry may witness similar acquisitions, job and salary cut in the coming days,? a senior fund manager from a foreign fund house said.