Like many advisors, you must have received queries on scheme rationalisation from your clients.
A few months ago, SEBI had directed fund houses to categorise their products in a manner that is easy for investors to understand. The market regulator also classified the types of schemes that fund houses can offer. Following these changes a fund house can have only one scheme in a particular category.
To align with the circular, many fund houses have either merged or changed the fundamental attributes of their schemes.
We talked to a few advisors to know what they are telling their clients.
Lovaii Navlakhi, International Money Matters
Since very few funds make it to our list of recommendations, we have seen changes in only a few schemes post scheme rationalisation.
In this scenario, we are telling our clients to exit the scheme if the fund house has changed its attributes. However, if such a change is not significant (as with most of the schemes), we tell them to remain invested for some more time.
We have advised those who have redeemed their investments due to change in fundamental attributes, to invest in new schemes having a good track record through SIP and STP route.
Vinod Jain, Jain Investments
We do not believe in creating unnecessary confusion among clients. Hence, we have not communicated with our clients about the changes. In my view, scheme rationalisation will not have significant impact on the quality of portfolio and performance of the schemes.
However, if someone asks us about the changes, we tell him or her to remain invested for some time. We are waiting for the completion of this exercise before arriving at any conclusion. If there is significant change in the portfolio, we will rebalance it to maintain asset allocation of our clients.
Tejal Gandhi, Money Matters
Right now, none of my clients has expressed concern over scheme rationalisation. If I receive such a query, I will explain to them the rationale for the move and its impact. I am planning to send a mail to my clients to keep them updated on these changes. Also, I will hold a small meeting and a conference call with my clients mid-April to discuss the move.
Amol Joshi, PlanRupee Investment Services
In my view, this exercise will bring two key changes – cosmetic changes and changes in fundamental attributes. While the cosmetic changes will not have any impact on scheme performance and portfolio, fundamental change is something we should examine.
We have to see whether the schemes, whose fundamental attributes have changed, still fit into the client’s portfolio. We will check if the scheme objective is in line with its category. For instance, if an investor has invested in a mid-cap fund and eventually it has become large and mid-cap, we have to see if the scheme suits the investment objectives of the client.
