Dutch major set to launch $500 mn India fund

The Netherlands-based Robeco Group, which recently bought 49 per cent stake in the mutual fund arm of Canara Bank, is raising $500 million through a dedicated India equity fund from investors in Europe and the US.

The fund would be sub-advised by Canbank Investment Management Services and it would be launched in the first quarter of 2008, said George Moller, CEO, Robeco Group, in an email.

Despite the recent correction, the group which manages $185 billion assets, feels India remains one of the best secular growth stories. "A setback in the Indian equity market will be healthy and provides an excellent opportunity to buy into business models that are experiencing high earnings growth of over 20 per cent," said an official of Robeco Investment Fund Managers.

The domestic markets, which gave returns of over 40 per cent in 2006, saw returns dip 10 per cent in 2007 till date. The official said he expected volatility in the Indian markets might continue for a while.

"Indian markets, which were the most expensive among emerging markets, may continue experiencing volatility for a while. There have been huge foreign fund inflows into equities, of which a large part came from hedge funds. One could argue that this capital is not long term dedicated capital. In the case of a global uncertainty, this could lead to more selling pressure for Indian stock markets in the near term," the official said.

Moller said size of the proposed India equity fund, "subject to good performance," would reach $1-2 billion.

On the joint venture with CIMS, he said the group would be using the latter's network of 2,500 branches. "Success in the asset management is a combination of two factors: products and distribution. Robeco can take care of products and it will do so by revamping investment processes, compliance, risk management etc. On the other hand, we realise that Robeco is an unknown entity in India and the brand identity is key in distribution. We have deliberately chosen to go into a joint venture with a partner that can provide distribution," he said.

Robeco's joint venture with Canbank coincides with the entry of several foreign players in the domestic mutual fund sector. Swiss banking major UBS bought Standard Chartered's AMC business in India while AIG, JP Morgan, among others, have entered the country on their own.

On the products that Canbank-Robeco joint venture can introduce in the country, Moller said: "We will aim at positioning a product line, that will be distinctive in several areas: introducing sustainability and clean tech overlays that we currency have through sustainable asset management in Switzerland and introducing tools that we currently use for our emerging markets funds, thereby, ensuring a rigid and institutional approach to investing."