Even before SEBI put regulations on scheme merger, the Rs.20 lakh crore mutual fund industry has been on the path of consolidating their schemes.
The industry has seen a few mergers in equity and debt category in the current calendar year. There are many reasons for the increasing interests in mergers such as lack of investment opportunities, small AUM, underperformance of funds, tax-friendly structure and reducing the costs of running additional schemes. The Budget 2015-16 has clarified that there will be no tax incidence in merger of schemes.
Last month, DSP BlackRock MF merged its DSP BlackRock Technology.com Fund with DSP BlackRock Opportunities Fund. Sharing the rationale for this decision, the fund house said that there is lack of investment opportunities in the technology sector. It is unlikely to create significant long-term unit holder value, said the fund house. The fund house manages assets of Rs.3200 crore in DSP BlackRock Opportunities Fund (surviving scheme).
Earlier in July, HSBC MF merged its HSBC Dividend Yield Equity Fund with HSBC India Opportunities Fund. HSBC India Opportunities Fund has Rs.551 crore of assets.
This month, Edelweiss MF and Mirae Asset MF will be merging their schemes.
Edelweiss MF has proposed to merge Edelweiss Balanced Advantage Fund with Edelweiss Dynamic Equity Advantage Fund, which will come into effect from September 20. Last year, the fund house had merged Edelweiss Emerging Leaders Fund with Edelweiss Mid and Small Cap Fund.
Mirae Asset Mutual Fund will merge Mirae Asset China Advantage Fund with Mirae Asset Great Consumer Fund on September 15. Swarup Mohanty, CEO, Mirae Asset MF says that Mirae Asset China Advantage Fund did not find many takers. “Running a global fund is a huge challenge. Since the fund did not find favour among investors and distributors, it does not make sense to run this fund with small AUM,” says Swarup. The fund house is managing Rs.10 crore in Mirae Asset China Advantage Fund.
In debt category, Principal MF consolidated Principal Bank CD and Principal Short Term Income Fund. Similarly, Tata Gilt Short Maturity Fund merged with Tata Gilt Securities Fund. A spokesperson of Tata Mutual Fund said that the merger of the debt funds is in line with SEBI recommendation to merge similar schemes.
Principal Mutual Fund has also announced the merger of Principal Government Securities Fund with Principal Dynamic Bond Fund with effect from September 30.
Considering the regulatory push, the industry may see some more scheme consolidation in the near future.