Alliance Capital of Boston is looking to get involved in India's growing pension market.

In November, Alliance signed a memorandum of understanding with State Bank of India, the nation's largest bank, to set up a company that would concentrate solely on pension funds.

The joint venture is awaiting approval from the bank's board and from Indian regulators, said Karan Trehan, an Alliance senior vice president.

"The demographics would point to a large pool" of potential assets, he said.

However, Mr. Trehan-who is also chairman of Alliance Capital Asset Management (India) Private Ltd., the firm's Indian unit - was unable to supply numbers for the Indian pension market, and he cited its relative immaturity compared with the U.S. market.

The venture would involve only 100 of State Bank of India's 8,000 branches, he said. The new company would hire 20 people in its first year, with an eventual target of 50 or 60 employees, Mr. Trehan added.

Alliance entered the Indian investment market in 1989 and has managed mutual fund assets there since 1994. It manages nearly $100 million in five mutual funds - all invested in Indian assets - including $1 million in a closed-end fund containing pension assets for retail investors, Mr. Trehan said. The Indian government does not let funds invest in foreign assets, he said.

But looser regulations in India have made it easier for foreign investment companies to get involved in the pension market. And as in other countries, the pension business in India is underfunded, creating a need for investment companies, Mr. Trehan said.

In February the Indian government passed a budget that lets pension funds invest 10% of their assets in mutual funds. Previously pension programs were restricted to buying only Indian government fixed-income paper, Mr. Trehan said.

The government also cut taxes for retail investors on investment dividends to encourage Indians to use the market as a savings vehicle. Previously, consumers had tended to put their money in traditional savings accounts and in corporate debentures, Mr. Trehan said.

The change has encouraged Indians to invest in the stock market and has proven a boon for Alliance, Mr. Trehan said. "Our fund flows have quadrupled," he said.

Indian pension assets are managed for three primary groups: corporate, retail or voluntary, and government-sponsored programs called public provident programs that are similar to the U.S. Social Security system, Mr. Trehan said.

Alliance employs 40 people in six offices for its mutual fund business in India.

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