Should You Worry About the Split of DSP and BlackRock?
One of India’s largest fund houses is undergoing a major upheaval in its ownership. Yes, it’s the DSP BlackRock on which we are pointing at. Until a few days back, 60% of its asset manager was owned by DSP group. Now, the company has bought the entire stakes of BlackRock, thus taking 100% ownership of the mutual fund company.
What could be the reason which led them to part their ways? Will the split be a significant reason for concern of the investors? Let’s find out the true story!
What’s the Reason Behind this Disunion?
According to the reports, both the co-owners, i.e., DSP and BlackRock were planning to seek 100% ownership of the asset management company. Since DSP was the majority stakeholder, it was easier for it to have its way and the rest is the history. Hemendra Kothari, Chairman DSP BlackRock MF, believed that in the next decade the AMC business is expected to grow manifold in India, thus it a step to capture a significant portion of that growth.
BlackRock, on the other side, is the largest management company in the States which is managing funds worth of $6.32 Trillion as of March 2018. Being an aggressive player on global grounds, it may be not content by remaining a minority holder for long. Thus, there is a strong belief that seeing the pace of growth in the Indian market, BlackRock may not be planning a quit, it can acquire another fund company or develop one of its own.
What were the Other Major Changes Faced by the Firm?
The management team of any AMC plays a prominent role in determining its success, and when talking about DSP BlackRock, it undoubtedly holds some of the best fund managers in the country. Speaking of DSP BlackRock, in the past one year and specifically in the past three months, it has seen a number of exits. Last year, S. Naganath, President and CIO, puts his papers and joined Franklin Templeton Investments. In 2016, Dhawal Dalal, the head of fixed income products at DSP BlackRock, quit and joined Edelweiss Mutual Fund.
Right after Naganath's exit, Maheshwari took over the baton and held it strong. His performance is depicted from almost all the products he holds in the firm as they are all presented in the top quartile in their respective categories despite Naganath quitting the fund house.
The reason behind these exits is the cultural shift that is happening in the AMC such as tightening of performance metrics as it impacted the way employees get compensated. The other reason could be the emergence of new opportunities elsewhere. But still such changes are given less heed, and the firm is committed to focusing on improving sales/ distribution which is an area that it could improve on.
What Could be its Impact on the Investments?
There have been several ownership changes in the Indian mutual fund companies till date, 25 to be exact. Thus, the news about the disunion of DSP and BlackRock shouldn’t be a big shock. Such changes are superficial. Considering the kind of revolution the mutual fund industry is experiencing while managing the capital of over 21 lakh crore investors, AMCs are well-prepared for such changes in advance.
Now, considering the case of DSP Mutual Fund specifically, it is believed that DSP has a strong legacy and it’s well furnished to do without BlackRock. Just like the case of L&T which emerged well after the exit of Fidelity. Even managers and CIOs leaving fund houses is not a new thing. Now, the question is how much will this move impact investors. To this, our experts believe that all the processes and systems at DSP Mutual Fund are in place. Uncertainty due to such changes disturbs investors, especially in volatile markets, though it may have nil or minimum impact.
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