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September 8, 2022

India may permit PE funds to own stake in asset management firms

The Securities and Exchange Board of India (Sebi) is exploring a suggestion to let private equity (PE) fund to own asset management companies (AMCs) operating in the country, reported The Economic Times.

The proposal is aimed at increasing competition as well as mergers and acquisition in the industry.

In addition, Sebi is weighing the possibility of allowing unprofitable sponsors to invest in mutual fund firms on the condition of them meeting proper criteria. Analysts have noted that this might encourage fintech firms to foray into the asset management industry.

According to sources familiar with the matter, PE funds with net worth of INR1.5bn (nearly $19m) and with ability to set up the final beneficiary will be eligible to invest in Indian AMCs.

However, Sebi has not given any confirmation on the development.

One of the sources was quoted by the financial publication as saying: “There has to be a corporate structure the place the non-public fairness fund brings its own capital.

“It may even have to move the fit-and-proper standards.”

In April this year, Sebi constituted a working group to assess the eligibility standards for the mutual fund sponsors.

In its report, which was recently submitted to the regulator, the committee offered various proposals. The mutual fund advisory committee of the country also discussed these suggestions.

The committee further suggested to have a lock-in period of three to five years for PE funds who wish to serve as mutual funds’ sponsors.

It is also reported that the latest move of the regulator could lead to the establishment of mutual fund businesses by professional fund managers in partnership with PE funds.

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