Insurer Allianz SE expects to sign a deal within weeks to set up an asset management joint venture in India, becoming the latest global firm to target its promising but fiercely competitive fund market.
-- JV to target $bn in assets under management in two years
The German firm already operates one Indian joint venture, Bajaj Allianz Life Insurance Co Ltd, in partnership with Bajaj Auto, India's No. 2 motorcycle maker. Allianz executive Marna Whittington said last month the firm was in talks with the Bajaj group about also setting up a fund joint venture.
Douglas Eu, chief executive officer, Asia Pacific with Allianz Global Investors, said he could not identify the potential partner for regulatory reasons, but noted the Indian firm would help the venture quickly establish a name in the world's second most populous nation.
"I'm optimistic we will sign a joint venture in the next four weeks," he told Reuters in an interview in Hong Kong.
"Our entry strategy is there to try and minimise the amount of upfront losses that we're going to take and try to minimise the amount of upfront investment in branding."
Ranjit Gupta, an executive with Bajaj Finserv Ltd, confirmed the group was in talks with Allianz but said nothing had been decided. India's 35-member fund industry had about $124 billion in assets under management at the end of July. While the industry has been hit by a near one-third plunge in Indian stocks this year, Boston Consulting Group has forecast assets could more than quadruple by 2015.
Allianz Global Investors, the fund management arm of Europe's largest insurer, had 953 billion euros ($1.405 trillion) of assets under management at the end of the first quarter. It controls a stable of fund managers including fixed-income giant PIMCO.
Global insurance firms such as France's AXA, Britain's Prudential Plc, Standard Life Investments, Canada's Sun Life Financial and Dutch insurer Aegon have insurance as well as fund joint ventures in India.
Hong Kong-based Eu, a fan of management guru Peter Drucker, said Allianz favoured a joint venture structure partly because of the relatively low capital requirements and the fact a domestic partner could help it work with Indian regulators.
"In a market like India, there is definitely an advantage to being local ... It's not easy to make money there, and it's very easy to lose money." Foreign firms that have sought to go it alone in India have at times had difficulty gaining a foothold in the market. Earlier this year, South Korea's Mirae Asset raised less than $25 million with launch of its first product, which coincided with a stock market drop. Eu said once the joint venture is operating, it would aim to reach a break-even level of assets under management of more than $1 billion within two years.
The Hong Kong fund industry veteran, whose hobbies include playing the ukulele, said while India's emerging middle class, high growth rates and massive potential made it a sensible long-term bet. "It is smaller industry than China, but it's got a lot of the same dynamics that could potentially lead to the kind of growth we saw in China," he said.