What can mutual funds learn from Fidelity's exit?

Fidelity is seeking buyers for its mutual fund business in India, after six and half years of operations. Fidelity had accumulated losses of over Rs 300 crore since the time it started operations in India in 2005, and in a global review of its asset management business, it found its Indian operations failing to meet expectations.

What went wrong with Fidelity? It had everything going for it when it came into the country. The equity markets were booming in 2005 and the boom continued into early 2008.

Fidelity had an established brand, deep pockets, long-term vision, established India research from its global funds investing in India and a good reputation of managing money worldwide. Fidelity should have been a success story but it wasn't.

It is important for prospective buyers of Fidelity's business and existing mutual funds that are struggling for existence to learn from Fidelity's failure. In fact, it cannot be said that Fidelity failed in India. It has built up a good equity base and a couple of its equity funds are large and have the potential to grow further.

Fidelity's Equity fund has an asset base of over Rs 3,000 crore and its performance is above par and has many awards to its credit. Fidelity's Tax Advantage fund, too, has an asset base of over Rs 1,000 crore and above par performance.

Not many fund houses in the country can boast of single equity funds that have such large asset bases.

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