Prudential Global Investment Managers (PGIM), which has set a target of being among the top 10 fund houses over the next five years in the country, is looking for an acquisition to drive its mutual fund business here, a top company official has said. With a mutual fund AUM of Rs 4,300 crore, PGIM India MF is ranked 29th, making it one of the smallest among the 40-odd players who manage over Rs 27.5 lakh crore funds.
But on the back of huge demand for its global equity opportunities fund, which over the past 11 months alone has become the fastest-growing foreign fund with an AUM of Rs 300 crore — up from Rs 10 crore in October 2019, the fund house is confident of clipping at over 50 per cent to close at Rs 6,000 crore MF assets by March, PGIM India MF chief executive Ajit Menon has said.
PGIM India MF is the fully-owned subsidiary of the US-based Prudential Group’s PGIM that manages over USD 1.4 trillion, making it the 10th largest fund house globally.
“Globally, we are the tenth largest fund house with over USD 1.4 trillion in assets under management. But with just around Rs 4,300 crore of AUM, we are ranked only 29th here. So, our objective here to be among the top ten and be relevant.
“My mandate from the headquarters is to grow fast and be among the top 10 over the next five years and be relevant, driving both organic as well as inorganic growth. We’ve been asked to identify a suitable AMC for the buyout, which we may consider over the next 24 months,” Menon told without disclosing what asset/deal size they are looking at.
Organic growth will come from the retail segment where we have an equity AUM of around Rs 1,700 crore now, the fixed income book of Rs 2,500 crore, and PMS is Rs 150 crore, taking the total mutual fund AUM to Rs 4,300 crore, he said, adding we have about Rs 2,000 crore in the advisory business.
Menon said the headquarters has internally identified five markets –China, Brazil, India, Indonesia and Mexico — as focus markets, where we aspire to be among the top ten. But in India, our focus is mutual funds.
“But, we are not in any hurry to buy out an AMC. Valuation is an issue now, as we don’t know the level of stress ahead. So, our resolve now is to organically grow till the direction is positive. We expect the direction to be clearer over the next 24 months when we will look for an acquisition,” he said.
So, for now, the focus is organic growth and to be a relevant player in a crowded market. Last six months have been very good, Menon said.
His optimism for a larger pie comes from the low domestic mutual fund penetration of 11 per cent, which is not even a third of the global average. Similarly, the AUM to GDP ratio is also very low at 13, while the global average is over 55. Again, the equity AUM to m-cap ratio is at 7 here as against the global average of 36.
“I expect to close FY21 with Rs 6,000 crore in MF assets, clipping at over 50 per cent from FY20,” Menon said, adding they have around 1.1 lakh active folios. He expects the equity AUM of Rs 1,600 crore to scale to Rs 2,000 crore by March, helping it take the overall AUM to Rs 7,500-8,000 crore.
PGIM India launched the global equity opportunities fund in October 2018 but did not focus on its sales in the first year. However, since October last they began to focus on this fund and the result is that since then it has grown over Rs 300 crore in AUM from just about Rs 10 crore in October last, said Menon, adding of the Rs 27.5 lakh crore of mutual fund AUM, the share of global funds is only under Rs 10,000 crore in the country.
He said almost Rs 100 crore of the Rs 300 crore AUM of this fund was added in the past one month alone, as it has given over 50 per cent return to investors.
This fund invests in marquee stocks like Apple, Telsa, and Microsoft among others, Menon said, adding this funds invests 60 per cent of the AUM in American stocks, 30 per cent in European stocks and 10 per cent in China/Kong Kong equities.
