SANJAY KUMAR SINGH Be vigilantwhen fund ownership changes hands

Monitor the developments at DSP and IDFC Mutual Fund closely. Exit only if the fund manager or the owner changes, and the new one is not someone you want to trust your money with

Events are currently underway that will result in changes in ownership patterns at two fund houses. The DSP group has bought out BlackRock's

40 per cent stake in DSP BlackRock Investment Managers, and the bidding process for the sale of IDFC Mutual Fund is also underway. When such changes take place, they introduce an element of uncertainty. Investors need to keep a close eye on developments at these fund houses and respond in a well-informed manner to them.

According to experts, the critical contribution of BlackRock to the joint venture was the monitoring and risk management systems it had shared with the Indian entity. Says Kaustubh Belapurkar, directormanager research, Morningstar Investment Adviser India: “There was sharing of knowledge and risk monitoring tools by BlackRock. But DSP has built upon those systems and customised them to suit the local context, so the expertise won’t go away with the end of the joint venture.”

Investors need to watch out for changes in the fund management team. The team is entirely local, with no dependence on BlackRock on this count. Recently, there were reports that the chief investment officer (CIO)-equities, Anup Maheshwari, may exit. The fund house, however, has confirmed that Maheshwari would continue in his current position. Says Vivek Agarwal, co-founder, Upwardly.in, an online advisory and investment platform: “Investors need to watch out for possible exits by fund managers in the wake of all the changes happening at the fund house.” If the fund managers, many of whom have been handling their funds for quite some time, remain the same, there isn’t much cause for worry. But if new ones come in, investors should weigh their track records, and also evaluate their performance for a few quarters under their watch before deciding to stay put or exit.

Investors also need to monitor the fate of the international fund-of-funds that DSP offers where the mother fund, in which money from the Indian feeder fund was invested, belonged to BlackRock. According to the fund house, the current arrangements won't change, and BlackRock would continue to monitor them. Nikhil Banerjee, co-founder, Mintwalk, has a slightly different view. “If BlackRock acquires a stake in IDFC Mutual Fund, it is difficult to see how DSP investors will be able to route their money into BlackRock’s offshore funds. This is something that investors should watch closely,” he says.

Finally, investors need to be vigilant. “Review the performance of these funds more frequently to see if there are any changes in the style of fund management. We don’t expect any style drift to happen, but watch out for it,” says Belapurkar.

The bidding process for IDFC Mutual Fund is currently underway. According to media reports, Reliance Capital and BlackRock have emerged as the leading contenders for this fund house. Experts say that the change of ownership at the fund house per se is not a cause for concern. “If the fund house gets acquired by a wellknown entity, there is no issue. Only if an entity that is not well known in the field of asset management acquires it should investors review their investments,” says Banerjee.