As calculated on 22 September 2010, the total stock market capitalization of India stands at around US$ 3.4 Trillion. Compare this to around US$ 14 Trillion which is the total stock market capitalization in the US. India on the one hand has 43 AMCs and more seem to be on the cards in the near future; The US on the other hand has 685 distinct fund sponsors registered with the ICI (the American equivalent of the AMFI) in all. With relatively meagre market penetration for mutual funds, this makes for a compelling argument for new AMCs on the way who see a great growth opportunity in this underpenetrated market. In this article, we talk to Mr Vijai Mantri, CEO and Managing Director of Pramerica Asset Managers Pvt Ltd, among the newest entrants in the Indian mutual funds space to know more about their future plans and views on the Indian industry.
Average AUM for August 2010: Approximately Rs 101 Crores
- Pramerica Liquid fund
- Pramerica Ultra Short Term Bond Fund
Sponsor: Prudential Financial Inc.*
About Prudential Financial Inc.:
Prudential provides services in insurance, real estate and investments (including mutual funds and brokerage). Prudential has a 135 years history in the financial services business and is among the Fortune 500 companies. In all Prudential Financial has assets totalling approximately US$ 693 billion. Under mutual funds it manages approximately US$ 30 billion (Excluding money market funds and real estate investment funds).
Fundsupermart.com: There are various players in the Indian Mutual Funds Space and consolidation in the industry in on the cards how are new fund houses placed in this scenario?
Mr. Vijai Mantri: India has a high savings rate but according to a recent survey, however less than 10% of the annual income of households is invested in mutual funds. Also, retail investors account for only 26% of the total AUM of the industry. Thus, we believe that there is huge potential of growth of asset management business in the Indian economy. We also believe that there is enough room for existing players, new entrants as well as ones planning to start future ventures into the asset management business.
However, some consolidation is likely to happen in the asset management industry with the number of competitors multiplying by the day. This is nothing but a strong sign showing the promising future prospect of this industry.
FSM: What is your view on the way the Indian market has developed over the years and the way the regulations have shaped up in the recent past?
VM: As the Indian economy continues to grow at 9% each year there is immense potential of growth in the Indian economy. In addition, there is a significant opportunity in India for providing asset management products, services and advice.
Indian mutual fund industry is probably one of the best regulated in the world. Every change comes with its set of detractors. A lot of inertia has to be overcome to bring about any change. If you look at it closely, all the recent measures are loaded in favour of the investors, and anything which helps the investors will help in broad-basing the investor base of mutual funds. In the long run we will see the positive impact these changes will have in the industry.
FSM: Most foreign AMCs have Indian partners for their Indian operations, what is the reason for Pramerica going alone?
VM: We believe that we have the capability, expertise, experience and balance sheet strength. We also have highly competent teams, be it on the investments or the sales side. The successful launch of Pramerica Liquid Fund, which collected over Rs. 665 crores in its NFO, was a clear indicator of our competence.
FSM: In what way will Pramerica’s international experience in financial services help in the Indian operations?
VM: Our sponsor, Prudential Financial, Inc.(PFI), has over 135 years of global experience. PFI is the 12th largest money manager in the world^ with 693 billion US dollars of assets under management. PFI has also been ranked 65th in the 2010 Fortune 500 list of America’s largest corporations^ and as the 2nd largest insurance company in the US^. PFI has presence in over 30 countries. This helps us bring forth a rich blend of global resources, intellectual acumen and local expertise that give Pramerica in India an edge over the rest.
FSM: Can we expect foreign assets based funds from Pramerica considering the international theme hasn’t really caught the investors’ fancy in India?
VM: We are considering bringing in some of our globally proven products and strategies, which suit the requirements of Indian Investors. Such products, subject to local regulatory approvals, will have an underlying strategy that could be either localized and tested or imported through the feeder route.
FSM: When can we expect a full bouquet of products from Pramerica and any special additions up Pramerica’s sleeve for the Indian investor, something that may be Pramerica’s USP in the time to come?
VM: We are already managing the Pramerica Liquid Fund and we recently launched our Ultra Short Term Bond on the September 16, 2010. Two other products are lined to be launched in October, although the exact dates have yet to be finalized.
Pramerica Mutual Fund aspires to provide innovative products that will help the investors to create wealth. We will launch new as well as innovative products from time to time reaching to retail investors and bringing to them solutions rather than just products. We will also help our investors to bridge the gap between their aspirations and their current financial positions.
* Prudential Financial, Inc. (PFI) of the United States of America is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom.
^ Ranking source: Pensions & Investments Magazine, Top Money Managers List of 31 May 2010, based on total worldwide institutional assets as of 31 December 2009. AUM source: PFI as of 31 March 2010
^Source: 2010 Fortune 500 list of America’s largest corporations.
^Source: Ranked the 2nd largest insurance company in the US (life and group combined) based on total admitted assets, as per A.M. Best, as of 31st December 2008