Invest In India

The crisis in the US financial market has affected financial markets world over. The two major institutions Merrill Lynch and AIG, which are badly affected, have large operations in Indian markets. Besides in insurance sectors, AIG also has an asset management company (AMC) which runs mutual fund business in India. Merrill Lynch also has an AMC, DSP Merrill Lynch with domestic partner DSP.

However, the US is not likely to impact their operations in India. AIG in a statement said that its asset management business in India is well capitalized and governed by Sebi regulations, that ensures assets of clients are kept in a separate trust.

A senior AIG official said the company is working hard to continue with their commitment to deliver the customer. He said that the AMC is well capitalized and can meet all the financial liabilities.

He discounted any rumour of selling of the AMC to another suitor. But, a market source said that in the present condition, AIG might be forced to exit the Indian market to consolidate its position in US. However, a senior banker added that, the current developments should not affect the performance of the fund. But, at present, AIG AMC has not broken even and depends on the capital infusion from AIG. Therefore, any crisis in AIG in US will affect its operation in India.

The newly appointed leader of AIG Edward Liddy said that his intention was not to liquidate the company. That means the company is trying to return the Fed’s loan of $85 billion. For this, the company will need to sell its subsidiary units world over. The AIG AMC was set up in February 2007 and manages funds of Rs 3,200 crore. But a major portion is constituted of debt fund. In the equity side, it manages only around Rs 1,100 crore. However, the fund’s performance in the last one year is not highly impressive as its net asset value of an unit fell by 24% as against the industry average of negative 17%.

The source added that the fund was aggressive in marketing its unit across India and had opened offices in most part of the country.

The crisis in Merrill Lynch has affected the operation of DSP Merrill Lynch immediately as its CEO Andrew Holland left the company to join Ambit Holding. It is learnt that the entire top management of the company will go with Holland. This is going to affect the performance of the fund. In DSP Merrill lynch, the domestic partner DSP owns 60% and Merrill holds the rest 40%. DSP Merrill Lynch, which is operating since 1996, manages around Rs 16,000 crore as on March 2008. It has 13 equity oriented fund and 10 hybrid funds. Besides this, it also manages 37 close ended and 6 open-ended debt fund.