Yesterday evening a friend called up to say ..in 1995 we saw the birth of the Mutual Fund industry in 2015 will we see the end?
Well to start with there is no ‘take over of a mutual fund’ as the whole world will report today. I think L&T Asset Management Company will take over the schemes managed by Fidelity AMC.
Frankly I am not so skeptical about the industry. When L&T took over Cholamandalam asset management company, the consolidation / integration process had started. Yes the consolidation is happening slowly – that is clearly because the industry is not growing. Unlike a few other deals, this deal would have involved some bargaining, and the seller had something on offer. Heard a couple of deals earlier where the sponsor was willing to PAY to get out of the business, but the details were sketchy.
What will now happen:
- People are skeptical about L&T’s ability to retain the ‘A’ team of Fidelity – even assuming that they are available.
- If the fund managers are not available how much of the Aum will stay?
Let us look at what L&T can do:
- get some high profile Fund Manager as step 1. It has to be a big brand name and a person with good image and communication skills.
- will such a guy join and will he stay is what one will have to see, but in this industry to get such a person is not very difficult.
What should the investor do?
this is really a difficult call. When a merger happens, the culture changes. Also when a fund house with Rs. 200 crores takes over a fund with Rs. 6500 crores (equity portion) not sure which culture will prevail.
The other 2 scheme take overs were when Zurich’s scheme were taken over by Hdfc (which was till then known as a debt fund house!) and Kothari Pioneer’s schemes were taken over by Franklin Templeton.
Many of us know that both Hdfc and FT went to great lengths to integrate the ‘new comers’ into the culture of the parent organisation. In fact many of the people from Zurich and Kothari Pioneer are in very important positions in Hdfc and FT respectively. Right from lowest level of sales guys to the top fund manager – I am sure you would have guessed – it is Prashant Jain that I am taling about! Amazing he never changed jobs but has at least 3 visiting cards. Two of the companies he worked for got taken over. One was of course Zurich…anybody out there who knows which was the other fund?
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