Mutual funds target offshore business to spruce up inflows

The all-pervasive India growth story and an eye on the abundance of liquidity among foreign institutions, seems to have mutual funds dusting off a virtually forgotten vertical in their businesses.

The offshore segment is being rediscovered by a number of fund houses who see an opportunity to scale up the business to take advantage of an increasing global focus on emerging markets such as India.

Aimed at foreign institutions such as pension and endowment funds as well as high net-worth individuals and non-resident Indians who are looking to invest in Indian markets, offshore funds collect money from these investors to invest in India and are domiciled in an offshore financial centre.
Among asset management companies (AMCs) who are eyeing the offshore segment are Mirae Asset Global Investments, Axis Mutual Fund, Motilal Oswal AMC and the yet-to-be-launched asset management companies of Sanlam Investment Management as well as the joint venture between Union Bank of India and Belgium-based KBC.

“There is interest in India right now as the investment environment is pretty good. There is a huge appetite for emerging markets and while people do have access to China, exposure to India has not been much. That could be the reason mutual funds are looking at countries like US, UK, Canada, Japan and Australia to get inflows,” said Nitin Rakesh, CEO at Motilal Oswal Asset Management. The firm is reportedly looking to launch a value-oriented Indian equity fund in the UK, subject to regulatory approvals.

“We are planning to come out with an India-dedicated offshore fund in 2010-2011. The business is very scalable and good products should do well in the growing economy,” said Arindam Ghosh, CEO, Mirae Asset Global Investments (India).

The potential of offshore funds is enhanced if there is a foreign partner involved who can help with the distribution, leading even new entrants with a foreign partner to pay attention to this part of the business. This has led some of the newer entrants in the field too to explore the segment.

“We expect around 10% of our business come in from the offshore segment, once we are up and running,” said G Pradeepkumar, CEO of the asset management joint venture formed by Union Bank of India and KBC.

South Africa-based Sanlam Investment Management is also said to be looking at introducing products to their offshore business.
Among other companies with offshore businesses are Birla Sun Life AMC, Sundaram BNP Paribas and ING Investment Management.