The Japanese asset manager had signed a memorandum of understanding with Mumbai-based financial services group Ambit Holdings Private back in 2007 with a view to creating a JV, but the financial turmoil has not been conducive to launching an onshore business.
Ambit did, however, incorporate an investment advisory practice, which has been run by ex-DSP Merrill Lynch executive Andrew Holland and his team since September 2008. Ambit was sub-adviser to two funds through the practice: the Ambit Frontier Fund, a long/short fund; and a sharia-compliant long-only fund.
Now that the JV is in place, Mumbai-based Holland becomes CEO of Ambit Investment Advisors Private, and Bill Wilder, Tokyo-based president and chief investment officer of Nikko AM, takes over as chairman.
The partnership enables Ambit to use Nikko AM’s product development capabilities and network of distributors across Asia. It also provides Nikko AM with local knowledge and investment expertise for its India funds, and with Ambit’s ability to invest in Indian securities onshore.
The JV will initially provide investment advisory services on an offshore basis, with the chief aim being to manage India products that Nikko AM can market to clients outside India. The fund manager will also help Ambit build out its advisory team in India. An onshore business may be launched down the road, but the firms did not give a timeframe.
“At this point the team focuses solely on Indian equities. We will sell that expertise to the rest of the world, through the institutional market, and leverage our network of 300-plus distributors across Asia,” says Wilder. “At some point in the future we will look at the opportunities for selling into India.”
The dedicated India funds from both partners will be managed and advised by the JV, with an AUM of $150 million at launch. These assets include the India portion of Nikko AM’s Bric fund, as well as the Ambit Frontier Fund and Ambit QInvest India Fund, a sharia-compliant long/short India-dedicated equity fund based out of Mauritius.
The JV aims to reach $1 billion in AUM within three years, and at that point the team may need to expand, says Ashok Wadhwa, group CEO of Ambit. But for the time being, the joint entity has the staff it needs, he adds.
Of course, things are not looking very positive for Indian equities at present, with the rupee taking a battering in recent months, the benchmark Sensex stock index having fallen 25% in 2011 to 28-month lows, and inflation still a threat. Yet some market observers believe that following the recent halt to interest rate hikes, rates may begin to fall next year, which would be a boost to domestic equities.
“In many ways, we’re fortunate we didn’t do the transaction a year ago, because markets have since come off 25%,” admits Wadhwa.
He suggests markets will remain very volatile through the first quarter of 2012, meaning it may not be a good time to invest, but once Europe finds a solution to its crisis – likely, he says, by Q3 – money will pour in, given the current attractive valuations.
Wadhwa believes a lot of institutional money will come from the Middle East – particularly given Ambit’s ties with Qatari bank QInvest and Nikko AM’s own relationships in that region. He also expects to see a substantial amount of institutional and retail flows from Asia.
As a result of the JV deal, Nikko AM owns 50.1% of Ambit Mauritius Investment Managers Private, a company registered as a foreign institutional investor by the Securities and Exchange Board of India that can manage Indian securities. The Japanese firm also owns 49% of Ambit Investment Advisors.
The Ambit network of companies includes: Ambit Corporate Finance; Ambit Capital, which provides institutional equities, wealth management and investment advisory services; Ambit Institutional Equities; a private wealth business; Ambit Investment Advisory; private equity arm Ambit Pragma Ventures; and non-banking finance company Ambit Finvest.