Will allotting options allow Lotus MF to retain employees?

With high levels of attrition plaguing the mutual fund industry, AMCs are increasingly offering Esops to retain talent. Lotus Mutual Fund is the latest to join the race.

UTI Mutual Fund recently announced plans to go public and allotted stock options to its employees. Lotus Mutual Fund has become the second fund house to take the same route.

Experts reckon that Esop culture is not new in the fund industry. Kothari Pioneer (the erstwhile Franklin Templeton), had diluted 4.5 per cent stake in favour of its employees, in the 90s.

Lotus Mutual Fund has diluted a 19 per cent stake in favour of 180 odd employees. The fund house does not have any immediate plans for an initial public offer, but has not ruled out an IPO after 3-5 years.

Ajay Bagga, CEO, Lotus India AMC, said, “When major fund houses would have listed five years down the line, these shares would become more valuable as we are a fast growing company.” The fund house has a net worth of Rs 92 crore and AUM exceeding 10,000 crores.

Fund houses have been luring talent with various promotional offers and perks, but to no avail. The employees of Standard Chartered fund were promised hefty bonuses provided they remained with the company for at least two years.

While Indian AMCs may not give Esops, their parent companies have this policy, according to the market watchers.

In a constantly evolving industry where new foreign fund houses set up bases everyday, it is not hard to imagine why people are moving.

Recently, Morgan Stanley Mutual Fund attracted Jayesh Gandhi and Navneet Munot from Birla Sun Life Mutual Fund. Prateek Aggarwal from ABN Amro Mutual fund moved to the yet-to-be launched Bharti Axa Mutual Fund. Similarly, Suyash Chaudhary from Standard Chartered Mutual Fund migrated to a fund house.

CEOs are not far behind. Sandeep Dasgupta left Deutsche Mutual Fund to join Bharti Axa Investment Management. Arindam Ghosh, who was with Fidelity’s Asia Pacific business team recently took over as the CEO of South Korean mutual fund, Mirae Asset, which recently launched in India.

Even Pankaj Razdan, the star CEO at ICICI Prudential Mutual Fund joined Birla Group’s financial services arm as a deputy CEO. Some fund managers moved to private equity and hedge funds.

Will stock options be the trick that enables Lotus to lure high flying employees?