The number of mutual fund schemes is likely to fall substantially as mutual fund houses consolidate similar schemes
Mumbai: Mutual fund houses are working overtime to start consolidating their portfolio of schemes to ultimately have just one scheme with a specific investment objective or theme. Fund houses are saddled with multiple schemes with similar investment objectives or themes, launched as new fund offers (NFOs) earlier to swell assets under management (AUM).
The pace of consolidation is expected to gain momentum over the next three to six months as fund houses seek to merge schemes with small AUMs with similar schemes having large AUMs.
The 41 fund houses operating in the country have a total of 3,848 mutual fund schemes. The top 10 fund houses account for 1,994 schemes, or 52 per cent of the total number of schemes, according to Accord Fintech data.
A senior official with a foreign fund house said only the large fund houses will undertake large scale consolidation of schemes.
AMC No of Schemes HDFC AMC 204 Reliance Capital AMC 230 UTI AMC 225 ICICI Prudential AMC 374 Birla Sunlife AMC 223 SBI Funds Management 143 Franklin Templeton AMC 160 DSP BlackRock Investment Managers 115 Tata Asset Management 181 Kotak Mahindra AMC 139 (Source: Accord Fintech)
On October 22, 2010, SEBI facilitated merger of similar schemes by saying that there won’t be any change in the fundamentals of the scheme that survives after the merger. The regulator had earlier stopped clearing NFOs with objectives that are similar to schemes already in the portfolio of the fund houses concerned.
Merger of schemes has already begun. For instance, UTI Mutual Fund has announced that UTI Infrastructure Advantage Fund – Series–I will be merged into UTI Infrastructure Fund, with effect from January 14, 2011.
Principal PNB Mutual Fund has merged Principal Resurgent India Equity Fund (both growth as well as dividend plans) with the respective growth and dividend plans of Principal Growth Fund. The merger has not changed the investment objective, asset allocation pattern, recurring expenses and other fundamentals of Principal Growth Fund.
Franklin Templeton Mutual Fund has announced merger of its Templeton India Money Market Account into Templeton India Treasury Management Account Liquid Plan from October 22, 2010. The dividend and bonus options under TIMMA have been merged with daily dividend reinvestment and growth options, respectively, under TITMA Liquid Plan.
D P Singh, National Head--Sales and Distribution, SBI Mutual Fund said, “Definitely, every fund house will be looking for merging of schemes. But this will not happen for every scheme. Only the smaller schemes with less than Rs 1,000 crore of AUM will get merged.”
Consolidation will reduce the expense ratio of the schemes and it will be in the interest of the investors, Singh said, adding “even SBI is having discussions to merge some of its schemes.”
Mutual fund officials said consolidation of schemes will also reduce the confusion among investors over the choice of schemes.
