Standard Life Investments grabs larger slice of India

By Ian Fraser

Sunday Herald

June 8th, 2003

STANDARD Life Investments is targeting massive growth in the Indian market following a deal which sees it boost its stake in the largest private sector mutual fund provider in the sub-continent to 49.9%.

SLI, the fund management arm of the mutual insurer Standard Life, has increased its stake in HDFC asset management, which in turn has taken over the Indian asset management arm of Swiss insurer Zurich.

Standard Life Investments created a fund management joint venture with Housing Development Finance Corporation in August 2000. Since then the company has become market leader in attracting new business in India.

Keith Skeoch, chief investment officer of SLI, told the Sunday Herald that SLI has recognised it will struggle to make massive inroads into the US institutional market and is focusing most of its international ambitions on expansion in India.

Skeoch admitted he prefers to leave the winning of chunky mandates from US pension schemes to “boutique players” such as Edinburgh-based Walter Scott & Partners, Martin Currie and Baillie Gifford.

He said: “We already have successful bases in the UK, Canada and Hong Kong – where we are looking to increase assets under management.

“And now we have upped our stake in HDFC Asset Management and bought the Indian end of Zurich’s equities operation.

“This makes us the largest provider of mutual funds in India and lays the foundation for us to become a truly global manager. The US is incredibly competitive, so without the long presence in the US market of some of those boutique players that you mention, we prefer to focus on growth elsewhere.”

Skeoch detects considerable potential in the Indian mutual fund market and believes that the acquisition of Zurich Asset Management in India will “significantly enhance HDFC’s penetration in both the retail and institutional sectors”.

He said it should also improve efficiency and profitability by spreading fixed costs over a larger asset base.

Skeoch added: “Standard Life Investments looks forward to working even more closely with HDFC Asset Management in the future and building on the already considerable success of this joint venture that has seen new business grow by (pounds) 940m over the last two and half years.

“It is estimated that the mutual fund market in India is worth £16 billion per year and will grow by 15% over the next 10 years.”

Sandy Leitch, chief executive officer of Zurich Financial Services UK and Asia-Pacific, said: “The decision to sell this business has been taken in light of our recently-announced strategy to allocate our capital to core life and non-life insurance markets in order to generate sustained profitable growth.

“We are very pleased that a business with the reputation and a track record that HDFC brings will now take on the management of the business and will provide continuity of the excellent service and fund performance that Zurich Asset Management Company unit holders have enjoyed.”

Last week, SLI revealed that sales of investment products fell 30% in the first half of 2003, down to £1.2bn from £1.77bn in the same period last year. However, overall assets under management rose by £3.7bn to £77.8bn.

Skeoch highlighted that Standard Life Investments had the highest proportion of mutual funds in the top quartile over the three-year period ending April 7 this year compared with its major competitors, with over 60% in the top quartile. Total staff at SLI had risen 8% since May 2002, to a total of 655 people.

He stressed that third party funds as a proportion of total assets under management were “close to the 15% target we set ourselves in November 1998”.

When the mutual insurer’s investment arm was rebranded in 1998, it managed £65bn of assets, of which a mere £5bn was for third parties. Today it manages total assets of £77.8bn, of which £12.3bn is for third parties.

Copyright 2003 SMG Sunday Newspapers Ltd.

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