Dutch financial services group Aegon intends to surrender
its licence to operate in India's mutual fund industry, which is going through
its roughest patch following a string of regulatory restrictions. An Aegon
official is said to have met capital market regulator Securities and Exchange
Board of India (Sebi) recently in this regard.
An email query to Aegon on why the group plans to exit India's mutual fund industry did not elicit a response till the time of going to the press. But sources in the mutual fund industry said Aegon no longer considers the asset management business in India as a 'strategic fit' for its growth plans in the country.
This is the first instance where a mutual fund has expressed its intention to the market regulator to give up its licence, industry officials said. "It's a little surprising. Despite the hurdles faced by fund houses, India continues to be one of the hottest emerging markets," said a fund manager with a private mutual fund.
Aegon is yet to launch a mutual fund product in India since receiving the li-cence from Sebi in October 2008 to start an asset management venture with New Delhi-based Religare Enterprises . But a month later, Aegon and Religare parted ways amid speculation of a rift between the two. The two companies continue to be partners in their life insurance joint venture, Aegon Religare Life Insurance .
Mutual fund industry officials said Aegon has been hunting for a partner, espe-cially a bank, for the asset management business since the split, but did not man-age to find one. The speculation is that the inability to find a joint venture partner could have contributed to the proposal to give up the mutual fund licence.
"Being a late entrant into industry, it was important for Aegon to get a partner with a decent network because it is really expensive and tedious to start afresh without distribution support," said an analyst, requesting anonymity.
Most foreign financial groups, which are part of India's 41-member strong asset management industry, have felt the need to partner a local bank, especially after the ban on mutual funds to charge investors to pay distributors an upfront fee, known as entry load. Distributors almost stopped selling mutual fund products after the move, affect-ing inflows into mutual fund equity schemes, which fetched them maximum fees.
Some mutual fund industry officials are surprised by Aegon's plan, as they feel the group is well-placed to take advantage of the offshore advisory business. Leading asset management companies nowadays are focusing more on their "offshore advisory" business, where they give research-based advice to foreign funds that invest in India for a fee.
An email query to Aegon on why the group plans to exit India's mutual fund industry did not elicit a response till the time of going to the press. But sources in the mutual fund industry said Aegon no longer considers the asset management business in India as a 'strategic fit' for its growth plans in the country.
This is the first instance where a mutual fund has expressed its intention to the market regulator to give up its licence, industry officials said. "It's a little surprising. Despite the hurdles faced by fund houses, India continues to be one of the hottest emerging markets," said a fund manager with a private mutual fund.
Aegon is yet to launch a mutual fund product in India since receiving the li-cence from Sebi in October 2008 to start an asset management venture with New Delhi-based Religare Enterprises . But a month later, Aegon and Religare parted ways amid speculation of a rift between the two. The two companies continue to be partners in their life insurance joint venture, Aegon Religare Life Insurance .
Mutual fund industry officials said Aegon has been hunting for a partner, espe-cially a bank, for the asset management business since the split, but did not man-age to find one. The speculation is that the inability to find a joint venture partner could have contributed to the proposal to give up the mutual fund licence.
"Being a late entrant into industry, it was important for Aegon to get a partner with a decent network because it is really expensive and tedious to start afresh without distribution support," said an analyst, requesting anonymity.
Most foreign financial groups, which are part of India's 41-member strong asset management industry, have felt the need to partner a local bank, especially after the ban on mutual funds to charge investors to pay distributors an upfront fee, known as entry load. Distributors almost stopped selling mutual fund products after the move, affect-ing inflows into mutual fund equity schemes, which fetched them maximum fees.
Some mutual fund industry officials are surprised by Aegon's plan, as they feel the group is well-placed to take advantage of the offshore advisory business. Leading asset management companies nowadays are focusing more on their "offshore advisory" business, where they give research-based advice to foreign funds that invest in India for a fee.
