Private lender, Axis Bank is soon going to foray into mutual fund business. The bank plans to commence this new venture in the coming six to eight months period.
The bank has received an approval from the Securities and Exchange Board of India (SEBI) to start its independent asset management firm and now it is waiting for the equity markets to stabilize before rolling out the first fund.
Siddharth Rath, the bank's senior vice-president and head of capital markets said, "We received Sebi's in-principle approval last month. The launch of our first fund will depend on the conditions of the markets, and investor confidence. We will have a balanced mix of equity, liquid and debt funds in our portfolio."
"The new company will be a wholly-owned subsidiary of the bank and will carry out asset management business," added Rath.
The bank received a green signal from the Reserve Bank of India for this new foray in the month of June. Until now the bank has been disturbing mutual funds of other asset management companies (AMCs) to its customers.
From the past one year, the asset management industry in the country is facing erosion in total assets under management (AUM). At the end of October 2008, the industry' AMU showed a fall of about 19% to Rs 432,000 crore against 532,000 crore, for the same period a year ago.
As per the SEBI instructions, a company needs to have a minimum capital base of Rs 10 crore to set up its own AMC. "We will invest as much capital as required to form our own fund house. Our initial investment will be Rs 25-30 crore," said Axis Bank Executive Director M M Agarwal.
In order to manage and distribute new funds across the country, the bank plans to employ up to 500 people. Rath confirmed that the bank has already decided on the important designations like CEO, chief investment officer, head of marketing, and other vertical heads. However he did not disclose the identities of these people stating that the business plans are still on the process.
Rath also told that in the starting, the bank plans to market and distribute these funds from its own branches without joining with any other bank. Axis Bank has about 750 branches across the country. With this entry, Axis Bank will become 36th AMC in the industry.
The bank also plans for a joint venture AMC with Banque Privee Edmond de Rothschild Europe. This European firm is a part of the LCF Rothschild Group and through this tie-up Axis Bank will offer the Indian customers with investment advisory services for private banking and wealth management.