Aditya Birla Sun Life AM mulls expansion plans

Singapore-based Aditya Birla Sun Life Asset Management is set to expand beyond offering India equity funds to global investors into debt, private equity and potentially absolute-return products.

The offshore arm of Birla Sun Life AM, an Indian mutual fund house with $15 billion in assets under management, was set up in 2010, when Anuradha (‘Anu’) Sahai came on board as chief executive.

Within the same group, Vikram Kotak left as chief investment officer at Birla Sun Life Insurance in Mumbai in December to set up his own business. Has been replaced by Sashi Krishnan, who was previously CIO at Bajaj Allianz Life Insurance.

Aditya Birla Sun Life AM is still relatively small (with under $1 billion in AUM so far) and can only currently sell to professional investors. As a result, the firm has focused on institutional mandates and has not set up many funds. “We should be able to grow our business through institutional mandates initially,” says Sahai.

Yet the firm has investment and back-office staff in the city state, making it an alternative product-manufacturing location outside India. And the company is planning debt, equity and alternative products across geographies depending on investor demand.

Over 90% of Aditya Birla Sun Life AM’s portfolio is in equities, while the parent asset manager has more than two-thirds of its domestic assets in fixed income. Sahai says the parent has been a pioneer in fixed-income strategies in India since its inception.

The firm is looking to forge deep relationships with well-reputed regional players as it grows its footprint, she notes. It has a partnership in Korea with Woori Asset Management, through which the two firms jointly launched an India equity fund in December 2010. Sahai expects the company to make more such announcements soon.

However, the volatility of the rupee and the markets in general in 2011 and early 2012 have not helped the case for investment into India, she notes. This has affected asset managers’ ability to raise funds in the region at present, concedes Sahai.

The result is that there is more interest in alternatives and absolute return, from both institutional and retail investors. Moreover, investors worldwide are pausing on single-country strategies at the moment, she adds.

“But we’re at the point in the interest rate cycle where debt is very attractive and equities look interesting as a result as well,” she says. With inflation peaking, the central bank in India is expected to lower interest rates over the next 12 months. This augurs well for investors to build positions in both debt and equities, she adds, as this will reap handsome returns over the course of the next two to three years.

“The reality is that India is a big growth market, despite all the challenges we see globally,” says Sahai. It has young demographics, a big consumption trend and $1 trillion in infrastructure investment on the way. In short, there are a lot of opportunities for growth – and the reform process is still moving ahead, she adds, albeit at a slower pace.

“From an institutional standpoint, where a fixed return on assets is needed,” she says. “India has to be in the portfolio.” Sahai admits there are quite a few other growth economies – such as Indonesia – but they are much smaller than India.

Aditya Birla Sun Life AM is also starting to consider the process of how to get into China. “It is very early days,” she says, “but we are open to partnering with Chinese asset managers, for example.”

The firm is also looking at working on private equity deals with its Mumbai-based sister firm, Aditya Birla Capital, which focuses purely on PE. It may be that the Singapore arm launches a mandate leveraging on the PE unit’s capabilities, says Sahai. In fact, it has been approached by clients about providing them with access to India’s PE sector.

“We’re known for alternative solutions in areas like PE and real estate in India, so there are opportunities to develop these outside India,” she says. The offshore arm may also launch absolute-return products when the demand arises.

Sahai’s previous experience running multi-strategy hedge funds covering convertible bonds and equities, among other things, should help in that regard. Before joining Aditya Birla Sun Life AM, she had launched Anew Capital in the US, albeit at an inopportune time, in late 2007.