The assets under management of all the domestic
funds put together today stand at a healthy
US$44,000 million. Apart from foreign fund
houses who have set up shop in India, many
Foreign Institutional Investors (FIIs) and
hedge funds are also very optimistic about
India. HSBC, Deutsche, Fidelity, SunLife
are only some of the names who have entered
the Indian investment management market.
The keen interest of global fund houses
in India coupled with booming capital markets
has opened up a very key opportunity; that
of providing services to these fund houses
in India. With the increase in number of
players, there is an increasing pressure
to perform and cut down margins. One efficient
and effective way of achieving this was
to replicate the model of "outsourcing"
In India, though there are many service
providers to cater to the accounting and
back office processing requirements of hedge
funds and FIIs, only a few players offer
fund accounting services to domestic fund
houses. With more fund houses wanting to
enter India, there is obviously space for
more service providers. Similarly in the
registrar and transfer agent space, there
are only a couple of dominant service providers,
the services of which are used by most of
the fund houses again indicating "opportunity".
The government is opening up Foreign Direct
Investment (FDI) in almost all financial
services sectors. This coupled with the
talented pool of human resources is being
effectively leveraged in the global market.
Apart from "business process outsourcing"
of low end back-office processing jobs,
a new wave of "knowledge process outsourcing"
has emerged. The skilful resources are now
being used to carry out more knowledge oriented
jobs such as research and analysis. They
provide valuable support to their global
counterparts who in turn are better able
to analyse and understand the Indian markets
making good money for their clients in return.
The initial response in this area has been
good and the future looks very encouraging.
One concern which has led to the slow development
of outsourcing activities in India has been
of data confidentiality. Business houses
in India had never been comfortable providing
access to their books and records and other
vital client/investors' data to an "external
However, there has been a sea change in
the thought process. Fund managers have
realised that to sustain and grow, they
need to focus and concentrate on doing what
they do best, managing money and leave the
rest for the external service providers.
The government has also played its part
done its bit by enacting the Information
Technology Act. As with all developments,
there are a few wrinkles in the entire process
which will be ironed out.
Global fund administrators such as Mellon
Bank are setting up shop in India to provide
fund administration services to their clients
spread across Europe. This has been possible
as India can boast of skilled talent and
is undoubtedly the "mecca" of
IT savvy systems and processes.
The message is clear. Outsourcing is here