Samir Arora is back. Nearly 18 years after he quit Alliance Capital mutual fund, Arora wants to try his hand once again in the Rs 30 trillion Indian mutual fund industry.
Based in Singapore, Arora’s Helios Capital Management (a Singapore-based entity that he founded) is the latest investment company to apply for a mutual fund (MF) license.
Alchemy Capital Management, which is co-founded by the widely-followed stock market titan, Rakesh Jhunjhunwala, has also applied for an MF license with SEBI.
In India, Helios is registered with SEBI to offer portfolio management services (PMS) and runs offshore long-short and long-only India-focused funds out of Singapore.
“We do not have any comment to make at this stage,” Samir Arora said in an e-mail response.
Helios applied for an MF license on February 25, 2021, while Alchemy Capital Management did so on January 1, 2021.
However, it remains to be seen whether SEBI gives approval to these firms.
Alchemy Capital offers PMS as well as alternate investment products.
Growing desire for MF licenses
As many as four investment companies have applied for MF licenses in the last four months.
Apart from Helios and Alchemy, five firms are waiting for investment licenses. These are Frontline Capital Services, Zerodha Broking, Bajaj Finserv, Capitalmind and Unifi Capital.
The country’s largest MF distributor – NJ India Invest – has got an in-principle approval from SEBI, as has discount broking firm Samco Securities.
The industry has also seen the exit of several fund houses over the years, especially those with foreign ownership – Morgan Stanley, Fidelity etc.
More recently, Principal MF decided to exit the industry, with Sundaram MF acquiring it.
“The mutual fund business is not easy to run. There are few profit-making fund houses that are around in the 41-strong MF industry, which shows how difficult it is make money in this business. Only if the fund house is able to gain a certain size, can it can absorb the costs and make profits,” said a senior executive of a fund house, requesting anonymity.
“As MF products cater to the small investors, the industry is tightly-regulated with compliance costs being higher,” he added.
Still, India’s MF industry remains attractive as mutual fund products have not spread widely in India. According to a report by ICICI Securities, MF assets under management are 12 percent of domestic GDP, as against the global average of 55 percent.
The growing interest in India’s MFs is good for investors, as new fund houses mean more choices for investors. Although most of the new entrants are yet to announce their plans, it is expected that most of them would launch passively-managed funds. This space has also consistently widened, as more fund houses have increased focus on index and exchange-traded funds in the last two-odd years. Expect a few innovative products as well.This would also ensure that the expense ratios investors are charged remain low, as the competition to gain and retain investor assets gets more intense.