(Bloomberg News) Goldman Sachs Group Inc. agreed to buy Benchmark Asset Management Co., India's largest provider of index-tracking funds, stepping up an expansion in Asia's third-biggest economy.
Goldman Sachs, which set up its own mutual fund unit in India in 2008, didn't oversee any assets in India as of the end of last year, according to data from the Association of Mutual Funds of India, an industry body. The transaction is expected to be completed later in the year, subject to regulatory approvals, Goldman Sachs said in a statement last week. It did not disclose the terms of the transaction.
The purchase gives New York-based Goldman Sachs access to a market where assets managed by mutual funds more than tripled to 6.8 trillion rupees ($150 billion) in the five years to December 31, according to the industry body.
"It's curious that Goldman is buying Benchmark because they don't have an ETF business anywhere in the world," said Dhirendra Kumar, New Delhi-based managing director at Value Research, a firm that tracks funds. "I think this purchase is more a statement of their commitment to India."
Benchmark Asset Management oversaw 29.35 billion rupees in assets as of December 31. The company last year began selling an exchange-traded fund linked to Hong Kong's benchmark Hang Seng Index, the first overseas-backed ETF in India.
"It's a good deal for Benchmark, which have been pioneers in the ETF business in India," said Kumar. "They have been facing a lot of competition from rivals like Kotak Mutual Fund and Motilal Oswal Mutual Fund getting into the ETF fray."
Becoming Popular
Exchange-traded funds, which allow investors to buy or sell shares of entire portfolios of stocks in a single security, have become popular worldwide since their creation in 1993 as they widen investors' access to different types of assets. ETFs, which mimic the performance of an index and trade like securities, are cheaper than mutual funds.
India's benchmark Sensitive Index has dropped 11% this year, the third-worst performance among 90 global benchmarks tracked by Bloomberg, after gaining 17% last year and 81% in 2009.
Mutual-fund assets in India have dropped 19% since peaking in November 2009, three months after the country banned firms from charging investors an upfront fee when they bought fund units, according to the industry association. The ban caused distributors, which previously shared the fee with the manager, to reduce marketing of funds.