A bright spotlight is being trained on the burgeoning Indian fund administration business now that the key players in the Indian asset management industry have decided to outsource their fund administration requirements to third-party providers. The goal is to introduce more efficiency into their operation.
The biggest stir was created by ICICI Prudential Asset Management when it decided in April to work with third party service provider HSBC Securities Services. The company decided to outsource to a third party service provider the fund administration of over 100 schemes it manages. HSBC says the ICICI Prudential deal is believed to be the largest and most complex third-party outsourcing project ever undertaken in the Indian funds industry. ICICI Prudential boasts Rs. 54,321.87 crore (US$12.72 billion) of assets under management.
Alastair Murray, who is head of investment administration, Asia-Pacific, institutional fund services at HSBC Securities Services says Indian fund managers have historically performed their own back office processing and fund administration and did not outsource the function to third parties. Murray explains that since most of them had already built formidable fund administration platforms for their own funds, they did not see any value in using other providers. “It is the new international managers who have just set up their operations in India that have shown more interest when it comes outsourcing so they can focus more on their core area of expertise, which is asset management.”
ICICI Prudential Asset Management’s decision is nothing short of a transformational step, says Murray, adding that it will now encourage other local fund companies to consider the idea of third-party outsourcing more seriously. Murray says there is no doubt that the market is looking with great interest at its new partnerships with the two new Indian funds. “They’re wondering whether HSBC will be able to handle such a significant amount of business without making a mistake.” Murray argues that no other regional players can as yet match HSBC's strength when it comes to providing fund management services to domestic fund management companies.
Canara Robeco sets record
On the heels of ICICI, Canara Robeco Asset Management announced its outsourcing deal with HSBC in mid-May. Paul Vrancken, chief operating officer of Canara Robeco AMC, says the outsourcing of fund administration was a key strategic initiative for the group. “It aligns perfectly with our business model in India,’’ he says, adding that the successful transition of the fund administration process will now allow the group to focus on growing its business in the Indian market.”
Vikramaaditya, head of HSBC Securities Services in India says the Canara Robeco mandate is in line with the growing trend towards outsourcing back-office processing by mutual funds in India to specialized providers such as HSBC. The project, he adds, was completed in a record time of two months. As of the end of April, Canara Robeco has Rs. 3,721.63 crore in asset under management making it one of the bigger asset management firms in India.
Canara RobecoAMC is a joint venture between Canara Bank, one of the largest banks in India servicing nearly 31 million customers through its 2,600-plus nationwide branch network and Robeco Group N.V., a 75-year-old asset manager, with over Rs. 809,000 crore under management as of Dec 31, 2007.
The timely completion of the project came despite the unique requirements of the Indian market. Jayant Rikhye, head of institutional fund services, Asia-Pacific, HSBC, says the Indian market has a unique and complex set of requirements in fund accounting. The successful implementation of the initiative at ICICI Prudential Asset Management, he says, only served to demonstrate the bank’s ability to customize global solutions for the Indian market. ICICI Prudential Asset Management Company is a joint venture between ICICI Bank and Prudential Plc ands it manages investing schemes for investors spread over 260 cities around India.
