For mutual funds, offshore advisory is gaining currency

Asset management companies are seeing some action in the offshore advisory space, where they provide expertise to institutions such as pension funds and other entities wishing to invest in Indian markets.

At least three are in the midst of new product initiatives or landing new mandates.

ING has launched an India-focused fund in Taiwan, which was open for subscription January 4-12. The company’s team in India would act as advisors to the fund. “We would be leveraging our position in the asset management space in Taiwan. The porfolio management service of ING Investment Managers in India would act as advisors to the fund,” said a spokesperson for the company.

IDFC Mutual Fund, on the other hand, is eyeing a new infrastructure-based product in the offshore advisory space after French firm Natixis picked up a 25% stake in the company, strengthening its international reach.

A company spokesperson denied the plan, suggesting the partnership is still in nascence.

Another asset management company, promoted by an aggressive domestic corporate entity, has landed a major mandate for its offshore advisory segment, its chief executive officer said. The person asked that neither he nor his firm be named since the deal is yet to be made official.

Foreign fund houses which have a presence in multiple markets are said to be better placed to attract business to the offshore advisory segment.

“We have been quite active on this front over the last few years and have India-related products domiciled in Luxembourg, US and Mauritius that are distributed through our global offices across the world,” said Harshendu Bindal, president, Franklin Templeton Investments (India). 

“In addition, the local investment teams have also been advising on mandates for large institutional investors including endowment funds, pension funds and sovereign wealth funds in recent years,” said Bindal.

While activity may have picked up in time with fresh allocations by foreign institutions in the new year, chief executive officers at major fund houses denied a January rush, saying that the process of getting business for the offshore segment is usually an ongoing one.

The Indian offshore advisory segment has picked up in recent years, with many mutual funds looking to exploring alternative avenues for increasing assets under management after recent regulatory changes.

The Securities and Exchange Board of India banned the collection of upfront fees, called an entry load, from investors in mutual funds causing the distribution environment to become more challenging, according to industry experts.

Assets under management in the equity segment, which is largely composed of retail holdings, has seen continuous declines.

There have been only four months where mutual funds equity inflows have been greater than the outflows in the 17 months since the ban, according to data from the Association of Mutual Funds in India.

In December, the net inflows were `877 crore, the first time they turned positive in six months.

This has apparently caused companies to turn to other business avenues including portfolio management services and the offshore advisory business.