ICICI Pru positions for global investment flows to India

Internationally sourced business is going to be an increasingly important contributor to revenues for top-tier Indian mutual-fund firms, says Nimesh Shah, chief executive at ICICI Prudential Asset Management in Mumbai.

India's economy is on a secular growth path and will notch up 7% or more annual GDP growth figures for another decade or more, he adds. It's therefore a given that many Indian listed companies will achieve even more sustained growth, which will result in rising earnings per share.

"Real long-term funds will come into India, and we must position ourselves," Shah says, adding that indigenous investment-management teams should regularly outperform offshore competitors.

But rival firms in Singapore, London or other locales are often better known to global investors. This has led ICICI Prudential to set up its own international group, headed by Krishna Prasad ('KP'), in order to work with investment consultants.

The firm is affiliated with Prudential Asset Management of the UK, which has developed a pan-Asian funds business on the back of its India joint venture with ICICI. Although Prudential AM is responsible for winning regional mandates, ICICI Pru's unit is designed to provide support and service to the regional firm's sales efforts.

But it is notable that the Indian business has taken the initiative to attract global investments for its domestic securities expertise. This has recently paid off in that it has gotten ICICI Prudential's funds rated by Mercer -- a first for a domestic fund manager -- and Krishna Prasad says the firm is engaged in a similar process with two other consultancies.

While this is a recent development, ICICI Prudential is no stranger to working for global clients. It has an Indian infrastructure equities fund that manages over $4 billion for Japanese investors, which is distributed by MUFG Securities.

The next goal is to win money from public agencies. such as sovereign wealth funds from Northeast Asia, says Shah. Although Prudential AM plays an important sales role, ICICI Prudential's international business unit is becoming more active as well. "We want to be credible," Shah explains.

The fund house is marketing its capabilities in Indian equities, debt and infrastructure, and is looking at marketing its portfolios in real estate. The one asset class it's not actively promoting overseas is private equity. "We have a full product suite locally," Shah says.

In addition to attracting assets from overseas investors, the biggest gains are meant to come from expanding mutual funds throughout India, beyond the biggest cities. ICICI Prudential has built a network of distribution in over 200 cities over the past 10 years, but mutual funds have yet to start to penetrate household assets.

One area where Shah does not see much potential, however, is selling global equities to Indian investors. "India products are in demand, and clients here see little point in diversifying right now," Shah says.