HDFC Mutual Fund to buy all eight schemes of Morgan Stanley in India

India’s largest mutual fund manager in terms of assets under management (AUM) HDFC Mutual Fund has entered into a definitive agreement to buy all the eight schemes of Morgan Stanley Mutual Fund in India, a statement said.

The financial details of the transaction have not been disclosed but recent deals in the industry have been struck at around 4-5 per cent of AUM. By that benchmark HDFC MF may pay around Rs 150-160 crore or around $25 million for the acquisition.

The average combined assets under management of the eight schemes for three months period ended on September 30, 2013 were at Rs 3,290 crore ($530 million).

With the deal, which is subject to regulatory approval, global financial services firm Morgan Stanley will exit the crowded mutual fund industry in the country.

“HDFC Mutual Fund has acquired a portfolio of strong performing domestic mutual fund schemes from Morgan Stanley and this acquisition is another step towards expanding our mutual fund customer base,” HDFC Asset Management Ltd’s CEO Milind Barve said in a statement.

HDFC Asset Management is a joint venture between Indian housing finance company Housing Development Finance Corp and Britain's investment firm Standard Life PLC, where the foreign partner owns around 40 per cent stake.

The deal will enhance the gap between HDFC MF and Reliance Capital as the top mutual fund manager. HDFC MF had overtaken Reliance Capital in the business a few years ago.

The deal is also significant as Morgan Stanley became the first global fund to enter into India’s mutual fund industry way back in 1994 with the launch of Morgan Stanley Growth Fund (MSGF)—an equity scheme.

In May this year, Morgan Stanley also sold its Indian private wealth management business to Standard Chartered.

This marks yet another exit of a foreign player from local mutual fund asset management business. Earlier in June, SBI Funds Management Co. Ltd—

owned by India’s largest state-run lender State Bank of India—acquired mutual fund schemes of Japan’s Daiwa Asset Management India Ltd. Last year, Fidelity had sold its mutual fund business in India to L&T Finance for around $100 million.

(Edited by Joby Puthuparampil Johnson)

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