Daiwa MUtual Fund Sell Assets to Futual Fund

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Daiwa Mutual Fund, in less than three years of launching its operations in 2011, has decided to wind up its business and sell its assets to SBI Mutual Fund, India's sixth largest mutual fund house, for an undisclosed amount amid fierce competition and slowdown in the industry.

Daiwa Mutual Fund, which has an asset size of . 266 crore, is part of the Tokyo-based Daiwa Securities Group, a leading financial services company in Asia.

"This acquisition will help SBI Mutual Fund acquire a unique client base, which will increase its penetration in retail and HNI space. Daiwa AMC has built robust relationships with its distributors and SBI MF intends to leverage on those relationships to acquire new retail customers," said Deepak Chatterjee, MD & CEO at SBI Funds Management.

 

 

 

Experts say this is just the beginning of a consolidation phase in the mutual fund industry as smaller players are hit by higher marketing and distribution costs. Currently, there are around 50 players in the industry, and 40 of them are hardly making any money, with top ten players commanding nearly 75% of the market.

"The consolidation in the industry is likely to continue as industry faces tough times," said

Dhruva Chatterji, senior investment consultant at Morningstar. "We believe only those companies can survive which have strong distribution reach," Chatterji added.

Tough business conditions are forcing many asset management companies (AMCs) to either rope in strategic partners or exit asset management business completely. Among the recent deals in the mutual fund industry, Fidelity sold its entire asset management business to L&T Mutual, while Religare, Reliance Mutual, Axis MF, IDFC and LIC have tied up with stronger global players like Invesco, Nippon, Schroders, Natixis Global and Nomura, respectively. Interestingly, N Sethuram Iyer, chief executive officer of Daiwa Mutual Fund, is an ex-SBI Mutual Fund manager. The asset under management of Daiwa has dwindled sharply over the past few quarters to . 266 crore from . 789 crore in September 2012. SBI Mutual Fund manages around . 54,000 crore.
Industry experts, however, don't see much merit in SBI Mutual Fund going for such a smallsize acquisition. "We believe it does not make any sense for SBI Mutual Fund to acquire assets of Daiwa Mutual Fund," said Dhirendra Kumar, CEO at Value Research. "If you look at allocation of funds, around . 240 crore is invested in liquid funds, and . 25 crore in equity, which is not impressive from a business point of view," Kumar added.

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