Vanguard Denies It's a Buyer
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Thursday, December 22, 2011

Vanguard Denies It's a Buyer

Could Vanguard Group [profile] be looking at a deal in India? Not likely, but that is the surprising implication of a report run by the Economic Times.

The report does not explain why a deal would make sense for Vanguard.

The Valley Forge, Pennsylvania-based mutual fund firm has heretofore focused on organic growth to build its franchise in the United States, yet the paper claims it is eyeing a stake in Axis Bank's Axis Mutual Fund. And a minority stake at that.

The India-based bank will reportedly sell between 26 percent to 49 percent of the mutual fund as international asset management firms show renewed interest in the Indian-based fund.

Such a deal does not seem to make a lot of sense for Vanguard to make for at least a couple of reasons. First, Vanguard's unique ownership structure as a mutually-owned mutual fund advisor (the shareholders of the funds own the company), would not seem philosophically suited to taking a minority stake in a fund. Second, a minority stake would do little to enable Vanguard to establish its brand in India, something that would logically be strategically important with a U.S. firm with a dominant brand.

While the paper does not explain any strategic reasons for a deal, it does cite unnamed sources as telling it that a senior Vanguard executive is currently in India to explore the fund management market opportunities.

Yet, there is the fact that Vanguard officials went on the record Thursday denying that any such deal is in the works.

The report of Vanguard taking an interest in Axis Mutual Fund was "completely untrue," according to a spokesperson. She added that "We also do not have a senior executive in India."

So much for that.

Meanwhile, the paper adds that Vanguard had earlier lost out to T. Rowe Price in an attempt to buy UTI Mutual Fund.

Whether or not Vanguard is kicking the tires at Axis, it does appear that something may be going on.

Rajiv Anand, managing director and CEO of Axis Asset Management Company, told the news source that the "Axis Mutual Fund is constantly exploring inorganic opportunities including strategic tie ups. In this context, we meet various entities including local and foreign mutual funds from time to time. A decision, if any, on entering into an alliance will obviously depend on the strategic imperative at that point."

Old Mutual is also named by the news source as a party interested in the Axis fund.

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