To take advantage of the highly under-owned pattern of the Indian equity market, French financial major BNP Paribas will set up an offshore fund jointly with the Sundaram group. The two companies are already running a mutual fund in India called Sundaram BNP Paribas Mutual Fund with assets of over Rs 10,000 crore.
According to top Sundaram BNP Paribas officials in India, the offshore fund will be domiciled in Singapore and legal formalities for this are under process.
“Initially, it would be a $100-million plus India-dedicated fund and it is likely to be launched before the end of 2009,” said sources close to the development, adding that Sundaram BNP Paribas would be marketing the fund aggressively in middle-eastern countries.
| FUND FUNDAMENTALS |
| * Initially, it would be a $100-million plus India-dedicated fund |
| *It is likely to be launched before the end of 2009 |
| *Credit Suisse too is looking to set up an India-dedicated offshore fund |
| TAX SOPS |
| * Of late, Singapore has become the most-favoured destination for fund managers |
| * Singapore grants tax exemption to a qualifying fund, provided it is not 100 per cent owned by domestic investors |
| * Collects tax, if any, from the investor |
| *Fund managers are taxed only 10 per cent on their fee-income |
BNP Paribas is one of the six strongest banks in the world, according to Standard & Poor’s. The group is present in 85 countries. The group is very strong in three major segments: corporate and investment banking, investment solutions and retail banking.
Apart from Sundaram BNP Paribas, Switzerland-based global financial major Credit Suisse too is looking to set up an India-dedicated offshore fund.
While most of the offshore funds are domiciled in Luxembourg or launched from tax havens like Mauritius or Cayman Islands, of late Singapore has become the most-favoured destination due to its tax exemption policies.
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To encourage fund managers to set up shop, Singapore has in place a tax incentive scheme to benefit offshore funds. A qualifying fund will be granted tax exemption, provided it is not 100 per cent owned by Singapore investors. Tax, if any, will be collected from the investor, depending on his specific profile. Apart from this, fund managers are taxed only 10 per cent on their income from fees.
According to some of the top traders in Indian markets, Singapore has become more of a single-point investment destination for major Asian markets. All major benchmark indices, including India’s Nifty, are listed on the Singapore Stock Exchange (SGX). In fact, Singapore has become so important that global financial majors can decide the mood of Asian markets from that country alone.
“If fund managers want to take a call on Indian markets, they do not have to bring their money to India. Instead, they can simply trade Nifty futures on SGX and this saves them legal hassles involved in getting money into India,” said a Singapore-based fund manager.