Tuesday, December 24, 2013

Morgan Stanley Mutual Fund exits India!

Morgan Stanley Asset Management Company joined the list of foreign asset managers who have left India.  Last year Fidelity sold its India business to L&T Mutual Fund and few weeks back Daiwa MF sold its business to SBI MF.  So, with the exit of Morgan Stanley mutual fund, the number of fund houses in India stands at 40.

Morgan Stanley Mutual Fund had assets of Rs3300 crores.  Morgan Stanley was the first foreign Mutual Fund to launch operations in India in 1993.  Though they had the first mover advantage, the business never picked up in the last 20 years for them.  You can understand the size difference where HDFC MF manages assets of Rs1.03 lakh crores and Morgan Stanley managed Rs3300 crores.  It is less than 3% of HDFC or Reliance MF size after 20 years of operations.

Schemes:
Morgan Stanley had 8 schemes in its portfolio, which I think very low for a fund house with 20 years of operations.  It goes to show the lack of focus in the fund management business.  But the top 3 funds of Short Term Bond, Liquid and Growth funds have more than 2200 crores of assets.  The rest of the funds have only Rs1100 crores of assets.  Morgan Stanley ST Bond Fund and Morgan Stanley Growth Fund used to be in the top quartile with regard to fund performance.  As the schemes are taken over by HDFC, the investors need not panic.  HDFC would run it as a separate fund for some time before they go ahead and merge these 8 funds with their existing funds.  The transfer of folios from Morgan Stanley to HDFC would happen over a period of time and the investors need not worry about the tax benefits on their investments because of this transfer.

Price:
I understand that the Morgan Stanley has sold the business for Rs170 crores to HDFC MF, which translates in to 5.16% of the assets.  I guess this is a decent price with regard to the size of the assets they have transferred.

Conclusion: 
Having worked in Morgan Stanley for couple of years, I feel sad that they are closing one of their businesses in India.  Most of us feel that India has a great potential and players with staying power would reap the benefits in the long run doesn't seem to cut ice with these foreign players or do they have a better idea of what would happen to this country than us?  That is the key question which remains to be answered.  

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