This report focuses on Credit Suisse, a leading global financial services company, to establish its Asset Management operations in India. The report provides a description about the background of Credit Suisse. Later, the report illustrates the reasons for Credit Suisse's venture in India along with the assessment of the risks involved. The report is concluded by providing practical strategies for managing the new environment.
Background Credit Suisse, the world's fifth-largest consortium, Switzerland's second-largest bank (second to its long-term rival UBS Union Bank of Switzerland), was founded in 1856 and is headquartered in Ruishisu Eastwood. It is an investment bank and financial service company operating in the areas of private banking, investment banking and asset management. It has subsidiaries in more than 50 countries across the world.
In addition to local operators in Switzerland bulk and retail banking business, Credit Suisse international professional services are concentrating in large banks, in its wide range of services project, Credit Suisse ensures its attractive service with its proprietary technology, strong capital, the Swiss unique and the carefully neutral characteristics. The corporate culture of Credit Suisse: Michael Hilti, as the steadfast chairman of culture in Credit Suisse, conveys that integrity, commitment, courage, and teamwork are the four cornerstones of the corporate culture at the company.
These might be the common cultures for most of the companies, but Credit Suisse has a long term commitment towards these four basic key areas. They realize that their global franchise is based on their core ethical values and their long-standing reputation for integrity, trust and professionalism. They respect the interests of their stakeholders and of society as a whole. Hottest investment location – INDIA A nation of 1 billion people, where 70% of population is under age of 35 an almost 50% under age 25, India is a young country with 2, 46 million graduates, 150,000 engineers every year, driven by young and fastest growing consuming class.
With more English speaking people population then Americans and those in other develop countries, India has undergone a huge shift to be competitive in the global economy. India's growth story is robust with 8 percent annual growth rate. India is world's fastest growing free market democracy, free and open economy and 2nd largest growing economy in the world along with rising foreign exchange reserves and fastest growing capital market which is second to none.
There are many reasons for investing in India in addition to the above, like higher deposable income, emerging middle class and lower middle class, competitive workforce at low cost (A job can be accomplished at 1/10th of the salary of western employer. ), investment friendly policies and progressive reforms from the Government of India. The government of India is committed to maintain 8 % growth rate, Inviting and encouraging more FDI across the sectors leaving few sensitive areas like defense. Government of India is also taking progressive steps towards de-licensing and deregulation.
Heavy investment on infrastructure is another attractive factor. Due to its strategic time zone that India falls in, it has an access to monitor the markets throughout the globe. Markets in Australia, New Zealand, Singapore, Hong Kong can be tracked in the early morning, Dubai and all European markets can be tracked in the afternoon and US market in the evening. Credit Suisse will encounter tough competition in India with more than 30 establish Asset Management companies in ; ABN Amro Asset Management Pvt Ltd, ICICI Prudential Asset Management Pvt Ltd, Reliance Asset Management Pvt Ltd, SBI Asset Management Pvt Ltd to name a few.
Credit Suisse can meet the growing needs of customers like High Net worth Individuals (HNI), Non Residential Indians (NRI) who are looking forward to pump more and more money into the Indian market because of the economic boom and Reserve Bank of India is looking to further raise the limit of capital account convertibility in three phase from $25000 to $50000 which has already been done then to $100000 in phase two and in phase three to $200000. This is planned to take place till year end 2010/11. This will result in huge sums of money flowing in and out of India and thus bring in more business to AMC companies.
Credit Suisse can leverage its global platform and local knowledge with the help of HDFC Indian leading financial services company to bring in next generation offerings in India. SWOT Analysis of India as the chosen Investment location Strength – Skilled work force, Good regulatory bodies in the form SEBI and RBI, Stable government, fastest growing economy with 8% GDP, geographic location. Weakness – Lack of infrastructure outside the metro cities, conservative policies, corruption, bureaucracy Opportunity – Capital account convertibility, delicensing and deregulation
Threat- Booming emerging economies likes China, Brazil, and South Africa. The Art of Asset Management As we intend to enter the Indian market with Credit Suisse offering its Asset Management services, following is a brief description of the business itself. With relation to its asset management business, Credit Suisse renders products across a broad range of investment categories, ranging from equities, multiple-asset class products and fixed income, to substitute investments like volatility management, private equity, real estate, and hedge funds.
Credit Suisse's asset management business deals with managing mutual funds, portfolio and other investments for an array of clients ranging from private individuals and governments to institutions and corporations. Credit Suisse has offices in 18 countries dedicated to asset management and operates its asset management business as a globally integrated network so as to deliver the bank's pioneer investment idea and expertise to clients around the world. "Credit Suisse – Group Annual Report 2006, https://www. creditsuisse. com/investors/doc/csg_ar_2006_en. pdf"
Further, Asset Management can be defined as the "Professional management of a number of securities (bonds, shares, real assets etc) so that it delivers intended investment motives for the benefit of the investors". As mentioned earlier investors here, refer to institutions or private investors. The objectives of asset management services include components of plan implementation, financial analysis, asset selection and stock selection. Apart from this the key element in asset management services is the monitoring of investments which is a never ending process.
Also, optimally managing a portfolio risk is an essential component of modern asset management. A portfolio is efficient if it has the highest expected return for a given level of risk or, equivalently, least risk for a given level of expected return, of all portfolios from a given universe of securities. Moreover, promoted by the economic boom, the arrival of foreign asset management companies, rising stocks, and raptorial marketing by mutual funds, the asset management industry in India is experiencing phenomenal growth.
Today there are 32 mutual funds that offer nearly 2, 000 schemes with monthly installments as low as Rs. 100 or $2. 5 per month. Commodity traded fund and real estate funds are two of the most preferred areas of opportunity in the Indian asset management market. Overall, assets under management (AUM) have increased by 48. 22% from Rs. 2, 655. 3 billion in June 2006 to Rs. 3, 935. 7 billion in June 2007. The country's 30 strong Asset Management fraternity includes the likes of AIGs and JP Morgans is expecting to see the entry of at least half a dozen of players due to the growing market.
To conclude, with the sky rocketing stakes in the Indian market; tiny issues like steep decline in equities or the doldrums on the fixed income front are meeting with new takers day by day. Each time the index rises; there is a creation of wealth. Investors today are well aware of this and there is nothing which can stop them. RISKS The different type of risks Credit Suisse can face during investing in India are categorized and analyzed below: Political Risks:
There has been political stability in India since the last decade. The worrying factor for many investors is that change in government could lead to change in policies. But regarding FDI there has never been reversal in policies instead there had been constant efforts from government to attract foreign investors. he foreign investment over here in India has to be examined by FIPB. The factors the FIPB examines while reviewing an investment proposal include the background and image of the corporation investing in India.
the FIPB also sees what kind of technology would be brought in India, what is the current situation of the business sector where the investors wishes to trade in as well as the contribution of the investor in improving that business sector. Foreign Sanction Risks: The foreign sanction on INDIA by the US due to its nuclear test in 1998 was theoretical and was relaxed in following months of it being imposed. The chances of any such sanction occurring again are very low or nil. Risks of rupee appreciation:
The rising rupee could be a major risks or hindrance for foreign investors. This would mean that foreign investors would pay more then ever. Market Entry Strategies Market Overview The economic boom in India has made the attention of foreign asset management companies to enter India, favorable stock markets, and aggressive marketing by mutual funds, insurance companies, and other pension funds; the asset management industry in India is witnessing rapid growth over the last 2-3years.
In real estate market, rising salaries, reduced interest rates for home loans, and liberalization leading to the influx of investments by foreign funds have led to a big boom. While investors with massive money have gained by directly investing in real estate, small investors have missed the real estate opportunity. The entry of real estate funds is expected to spread the benefit to the small investor as well in future.