UTI readies $1 bn in new funds

Written by Sourav Majumdar | Mumbai, Oct 28 | Updated: Oct 29 2007, 07:59am hrs
To shed its also-ran image, UTI Mutual Fund has gone in for an overhaul just months ahead of becoming Asias first listed asset management company. With an IPO coming up by March next year, the company has triggered a makeover of its structure and operations, using recommendations made by the Boston Consulting Group .

Not just this, in the pipeline are a hefty $1 billion worth of new funds waiting to be invested in 2008. These include an infrastructure fund that will be invested in unlisted companies.

In a virtual first, UTI MF with Rs 45,000 crore of assets under management, has also revamped its compensation structure and begun paying quarterly performance bonuses instead of annual ones.

In an interview to FE, UTI AMC chairman UK Sinha said the fund house was keen to shed its stodgy image and compete strongly in the marketplace. The BCG recommendations have been implemented, with several changes across the board being made by the AMC. BCG turned in its report in August.

Right now, we are consolidating our business. The first thing we have done is to have a serious look at our own structure and with the BCG recommendations, we have undertaken a complete restructuring of our marketing, operations and fund management. The outcome has been positive. We did some pilots and all have been hugely successful. Now we are increasing the coverage of these pilots and making them business as usual.

With two venture funds, UTI MF has lined up a third worth around $500 million apart from a $500-million infrastructure fund for unlisted companies. The portfolio management business, which was at Rs 150 crore, has now grown to Rs 1800 crore in two years.

Sinha said, over the past 3-month and 1-month periods, a number of UTI MF schemes had figured in the first quartile, indicating that the changes were yielding results.

On the operations side, UTI MF is consolidating and now has just one registrar instead of four previously.

We want to come to a stage in our response time where, if you are buying a scheme of ours, going for redemption, changing your address, or have any investor issue, we should be the best in the industry, he said.

Marketing has also seen structural changes with new verticals. People from private banks and having foreign mutual fund background have also been hired for those verticals.

The quarterly bonuses apart, the UTI board has cleared an Esop proposal, which would come into being in sync with the IPO. After the IPO, the four sponsors of UTI MF SBI, LIC, Bank of Baroda and Punjab National Bankwould together hold 51% in the expanded equity of the AMC, in equal share.