Deutsche the latest manager to exit India's funds market
Deutsche Bank is to sell its Indian asset management business to Pramerica Asset Managers for an undisclosed sum.
The business, with $3.2 billion of assets under management, is not considered core to Deutsche’s regional plans, despite the bank’s claims that the Indian business has been a success and it is fully committed to the country.
Meanwhile Pramerica Investment Management (PIM), ranked among the top 10 institutional money managers in the world, has forged a joint venture with Dewan Housing Finance (DHFL) as another plank of its expansion into India.
For its part, Deutsche Bank is saying the disposal of its Indian asset management interests “is a continuation of [Deutsche’s] global initiative to further focus its business on developing and strengthening its regional centres of investment excellence”.
The Indian business was established in 2003 and is now the second-largest foreign asset manager in India, after Franklin Templeton.
Ravi Raju, Asia-Pacific head of Deutsche Asset & Wealth Management, said: "We have built a strong brand with a well-respected investment and coverage team.”
All of which begs the question of why Deutsche would be so keen to sell the business off. Raju was not available to explain why the firm is selling up. Deutsche’s surprisingly bullish tone in the face of a major backtrack was only compounded by comments from Ravneet Gill, CEO of Deutsche Bank India, who said: “The divestment of our asset management business is in line with our strategy of focusing on our core businesses where we can achieve a leadership position.
"Deutsche Bank Group’s overall India franchise has posted strong financial results, and we remain absolutely committed to further investment and development of our business here given that India is strategically important to the bank’s global growth aspirations.”
The implication is that while banking has been profitable, the asset management business has not. When Raju spoke to AsianInvestor last year, he explained how the group had embarked on an integration programme, consolidating its once disparate asset-gathering businesses.
The integration has seen DeAWM combine the bank’s active, alternative and passive AM activities, as well as its retail and institutional distribution functions. The regional strategy, he said, has been to build coverage in certain areas and exit others: “We were dabbling in a lot of sub-scale onshore businesses."
Although some market players have talked positively about progress in the Indian asset management landscape, several things hold mutual funds back in India. One of them is regulation: managers are not actually allowed to address the assets of insurance companies or pension providers.
A bigger challenge is the low level of investor awareness and a lack of traction in wealth management. In the last two years, UBS, Morgan Stanley, Fidelity, Macquarie, Daiwa, PineBridge and now Deutsche have withdrawn from the market.
Pramerica is taking a different tack, acquiring the Deutsche assets and venturing out with a loans and investments group – DHFL – with a 30-year pedigree.
Glen Baptist, chief executive of Pramerica International Investments, said: “When the transaction is completed, we will have the scale and platform necessary to make our investment strategies available to clients across India and put us within sight of the top 10 asset management businesses.
“We are confident that the combined business, and our new joint venture with DHFL, will enable us to achieve our strategic priority of building an industry-leading India asset management business.”