See major thrust to ETF arm with Goldman's entry: Benchmark

Asset management company, Goldman Sachs Asset Management is all set to acquire Benchmark AMC. It is learnt that the deal is valued at Rs 120-130 crore or 4-4.5% of assets under management (AUM).
 
As on December 2010, Benchmark AMC's average assets under management (AUM) stood at Rs 2,935 crore, while equity AUM stands at Rs 955.8 crore.

In an interview with CNBC-TV18, Sanjiv Shah, ED of Benchmark Asset Management said, "We believe with the Goldman franchise, we can really take the ETF business to a much greater scale." "We want to increase our product suit to expand across asset classes, across geographies and make it much bigger than what we are today," he added. Benchmark AMC would become part of the passive business for Goldman in India and there won't be any major change in the management. Below is the verbatim transcript of Shah's interview with Mitali Mukherjee and Udayan Mukherjee of CNBC-TV18. Also watch the accompanying video. Q: What is the exact value of the deal? How it is been structured etc? A: We have not talked about the value yet and I don't have any comments to make. Goldman Sachs will buy 100% of Benchmark and that's basically the deal. Q: When are you shifting to Hawaii? A: We think exchange-traded funds (ETFs) are not there where they should be huge potential. So, lot of more work has to be done before we can go to Hawaii. Q: Why did Benchmark sell at this point because ETFs as an asset class was just coming into its own? It seems like it had a lot of upside, Benchmark was an accepted brand. A: Everything remains the same. All the factors you have enumerated are true. We believe with the Goldman franchise, we can really take the ETF business to a much greater scale. The distribution in the franchise of Goldman is pretty large. Our brand has developed pretty well and we see that taking us a speed much faster than we have done until now. Q: What kind of management changes takes place? Goldman Sachs already has a team that advises them on ETFs in India, is there a merger of sorts, who is now in charge? A: Goldman Sachs has a active business, which will remain. We will become part of the passive business for Goldman in India. There won't be any major change in the management. The management will remain the same. The whole idea is to take this business forward. In order to take this business forward, we believe that the franchise we built, the people we have are instrumental to that and they are going to come along with us to Goldman. Q: What kind of products will we see now? Will Goldman focus on the existing bank ETF, gold ETF etc, or will we see the launch of many other kind of products from the Goldman suit? A: In terms of the active management there will be some more products. But, talking about our space, which is the passive and ETF space, we already have the products, which we talked about. We have a few more in the pipeline with the regulator. We want to increase our product suit to expand across asset classes, across geographies and make it much bigger than what we are today. We have Nifty and say a two- three more local indices. We have a Hang Seng Index, we intend to have many more international indexes have more sector has more sector ETFs, have a Gilt ETF. Hopefully, wherever the regulator thinks it is the right time to have beyond gold, the other commodity ETFs. As we go along we want to have more and more ETFs and create an ecosystem where people really look at ETFs as a best way to invest. Q: What has been your experience over the last month or so with the way gold prices have trended? Have you seen inflows or have people not been that hot on ETF as a product to rout out any gold ambitions? A: The volatility in gold prices actually increases number of people who come into ETF, either way as the prices are going up or down. Indians are the largest consumers of gold in the market. Slowly, ETFs are becoming a kind of a port of call for most of the investors at least to buy. People who are buying bars and coins have started buying ETFs instead of bars and coins, jewellery market remains different. India consumes 800 tonnes of gold every year, 200 tonnes of gold in terms of what one might call the bars and coins and total ETF size is 20 tonnes. The volatility actually is helping the ETFs and people to know what the gold ETFs are. The growth potential is immense and it's been a great ride for us in the last one year when the volatility has been very high.