India may not be an emerging market for mutual fund managers after all. That is one takeaway from Fidelity's [profile] decision to sell off its stake in FIL Fund Management Pvt. and FIL Trustee Co. The Wall Street Journal reports that the buyer of of Fidelity Worldwide Investments' Indian businesses is Larsen & Toubro Group's L&T Finance Ltd.

There was no pricing released on the deal, which is expected to close later this year pending regulatory approvals. Fidelity Worldwide claimed only $1.8 billion of AUM in India at year-end 2011.

Fidelity Wordlwide keeps a 1,500 employee back-office and technology center in Gurgaon as well as private-equity-specialist Fidelity Growth Partners India. It also keeps an Indian-based equity research that manages Indian stocks for global clients.

Fidelity Worldwide executives explained in a statement that a strategic review "determined that FIL's global operating model was holding back an excellent business."

Fidelity's Indian operations had reported losses each year since opening in 2004, according to the paper.

Meanwhile, the Indian mutual fund market has quintupled in size since 2003 to $134 billion in AUM. So far, the paper reports that one hurdle for non-Indian asset managers has been the locals' preference for local managers and fixed income funds that carry lower margins.

Among the more successful U.S. asset managers in India are BlackRock's DSP BlackRock Investment Managers Pvt. with $5.9 billion AUM in India and Franklin Templeton Investments, which has about $6.9 billion in AUM.

American International Group, J.P. Morgan Asset Management, and T. Rowe Price Group also have stakes in Indian ventures.

Meanwhile, L&T Finance Holdings' purchase is its second since 2010. The $900 million L&T Mutual fund is primarily invested in bonds.

Y. M. Deosthalee, chairman and managing director of L&T Finance Holdings, told reporters that the deal will allow L&T to "be able to do more offshore funds much more aggressively than before." 

Edited by: Neil Anderson, Managing Editor


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