Manulife is bullish on the Indian economy and sees strong potential for growth in the asset management space, said Paul Lorentz, President and Chief Executive Officer of its Global Wealth and Asset Management business.
In a freewheeling chat with Moneycontrol, Lorentz said, “We are very optimistic about Indian economy. It is a large economy and one of the fastest-growing markets, particularly in the asset management space.”
According to him, India's asset management space is poised for growth, and he expects the assets under management to touch Rs 42 lakh crore in the next three years.
“It’s incumbent upon us to move mutual fund penetration from 5-6 percent to at least 30 percent. Consequently, the AUM of the mutual fund will grow from $390 billion (Rs 27.64 lakh crore) to over $600 billion (Rs 42.43 lakh crore) in next three years," Lorentz said.
The mutual fund penetration to GDP in India is merely 5 percent, while that of Malaysia and Thailand stands at around 30 percent of GDP.
In June 2019, Toronto-based Manulife picked up 49 percent stake in Mahindra Asset Management Company (Mahindra AMC) for $35 million (Rs 243 crore).
Mahindra AMC entered the mutual fund industry in 2016. It is among the smaller asset management companies in the country and has assets under management of a little over Rs 5,000 crore as of the September quarter.
Manulife primarily operates as John Hancock in the United States and Manulife in other nations, including their headquarters in Canada.
Its offices are situated in countries across Europe and Asia. They provide financial advice, insurance, as well as wealth and asset management solutions for individuals, groups and institutions. The company has assets under management of around $394 billion.
Several foreign players like Nippon Life, Prudential, Schroders, Sun Life, Amundi have entered the Indian asset management industry through joint ventures in the past.
Manulife intends to bring in simple products to India through Mahindra AMC joint venture as they are keen to increase retail participation.
“Simple products will help us penetrate deeper in India’s mutual fund market, which has close to 30 million investors under its ambit currently. This number appears miniscule when you look at India’s population of over 1.3 billion. Therefore, the growth potential is quite large,” Lorentz said.
Mahindra AMC currently has two lakh investors folios, from 400 cities (largely B30), and about 11,000 distributors.
Beyond 30, or the next 30 locations beyond the top 30 cities is called B30 in mutual fund industry parlance.
As on November-end, the total number of 44-player mutual fund indsutry folios stood at 8.65 crore.
At present, Mahindra AMC offers five debt schemes, four equity funds, two hybrid funds, and an equity-linked savings scheme.
Lorentz feels that Mahindra AMC has a good understanding of the local market. This, in turn, can help Manulife build simplified products and Mahindra AMC’s distribution network to secure prospective investors.
Speaking about Manulife’s plans to consider acquisitions in the insurance space in India, Lorentz said, “The AMC stake buy will helps us to understand the Indian market a little better. We’ve seen that foreign ownership restrictions have eased a bit over time. Let’s get this (Mahindra AMC) partnership going first. At a later stage, we can take a call on foraying into the life insurance space.”
Role of Manulife in Mahindra AMC
When asked as to what will Manulife bring to the table, Lorentz stated that risk and money management sensibilities across diversified asset classes – equities, fixed income, real estate, infrastructure and agriculture would come in handy in scaling up Manulife’s operations in India.
Furthermore, the best practices and processes learnt by the company in the 17 transcontinental markets served by it can be put into use in India.
When asked as to whether Manulife was keen on enhancing their stake in Mahindra AMC from its existing 49 percent, Lorentz said, “We are just entering the market, our goal is to work with a partner that is suitable. To the extent at which one finds a partner that shares values, ambitions in what you trying to achieve, the equity stake does not really matter.”
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