Kotak AMC buys PineBridge MF

Kotak Mahindra Asset Management Company, the country’s ninth biggest fund house in terms of assets, has acquired the local schemes of PineBridge Mutual Fund, for an undisclosed sum, subject to regulatory approvals.

PineBridge MF had assets under management (AUM) of only Rs 660 crore. The deal marks a third exit of a foreign fund house in less than a year and underscores the challenging conditions for smaller entities.

In the previous nine months, Morgan Stanley sold its domestic MF business to HDFC AMC and ING MF was acquired by Birla Sun Life AMC.

The Kotak deal size couldn’t be ascertained but those in the sector said the transaction value would be lower than recent acquisitions, struck at four to six per cent of the total asset size of the fund house.

“We have an appetite for further acquisitions which can create value for us and we would be keen to consider such opportunities,” said Gaurang Shah, president (asset management, life insurance and international business) of Kotak Mahindra Bank, parent company of Kotak AMC.

PineBridge MF’s total assets are less than two per cent of Kotak AMC’s AUM of Rs 37,000 crore (as on August).

“Smaller AMCs are finding it difficult to increase assets and profitability is a question mark. Going forward, there could be more such exits,” said Niranjan Risbood, director (fund research) at Morningstar India.

PineBridge operated seven schemes — three each in equity and debt and one in the gold segment. Its equity schemes had assets of around Rs 215 crore.

According to Dhirendra Kumar, chief executive of Value Research, “It’s not surprising to see AMCs exiting. They are unable to compete with bigger peers in the market, which are attracting most of the assets. It's a tough environment to do business.

The Securities and Exchange Board of India recently increased the minimum net worth requirement five-fold to Rs 50 crore.

As on June, the Rs 10 lakh crore MF sector had had a total of 46 entities.

Kotak Mahindra and associates are significant shareholders in Business Standard Limited.

Kotak Mahindra Group