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HindustanTimes Fri,18 Apr 2014

Fidelity considers exit; negative for Indian fund investors?

Dhirendra Kumar , Hindustan Times   February 05, 2012
First Published: 22:56 IST(5/2/2012) | Last Updated: 23:00 IST(5/2/2012)

Fidelity, One of the world's largest mutual funds, wants to sell off its business in India and get out of the country. By itself, such an exit is hardly something unusual in the Indian fund industry. Looking at the history of Indian fund companies, I can't help but notice that every single one of them (excepting those that have just started off) has had some upheaval or the other in its ownership. Stake sales, new partners coming in and old ones exiting, are the norm rather than the exception.

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The list of global fund management outfits who have exited India is not small. There's been Alliance, Threadneedle, Zurich, Sun F&C, AIG, Shinsei, Aegon, Lotus, Merril Lynch, Newton, ABN Amro, Fortis, Wellington, Cazenove and maybe a few more. However, practically all exited under some sort of external duress. Some of them were downsizing and rationalising their businesses globally, some were getting out of the business altogether, some exited during the financial crisis and some were just unable to grow beyond a tiny size.

Fidelity is different from everyone else on this list. It's true that it isn't making money in India, but it's making good profits globally, it has grown up to a reasonable size in India and most importantly, it has built up a good performance track-record for many of its equity funds. There's no obvious reason for Fidelity's exit except that the company's top brass just doesn't have any great hope for its business in India.

This is unfortunate because in many ways, Fidelity's way of doing things in India is distinctive in a very positive way. The AMC has always kept its focus on a small set of simple, long-term equity products and on getting investors in for the long-term.  Of course, the funds will continue under another name but unlike many such exits in the past, Fidelity's will be a negative for Indian fund investors.

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