By now, your clients must have received emails and text messages from fund houses about scheme mergers and changes in fundamental attributes of schemes.
This is because SEBI had asked fund houses to categorise their existing and new schemes under the 10 equity categories, 16 debt and 6 hybrid fund categories. To follow the new norms, fund houses have to either merge or change the fundamental attributes of their schemes.
So far, a few mid-cap funds have become large-cap, large and mid-cap or multi-cap funds. For instance, one of the flagship schemes of Mirae Asset in the mid-cap category, Mirae Asset Emerging Bluechip Fund, has become large and mid-cap fund. Now, the scheme has to invest at least of 35% each in large-cap and mid-cap stocks. As on Feb 28, the scheme had AUM of Rs.5,131 crore. Similarly, mid-cap IDFC Premier Equity Fund is now multi-cap. The scheme manages assets of Rs.5,717 crore.
Vinod Jain of Jain Investments believes that scheme categorisation will not have a huge impact on the core fundamentals of schemes. “I do not think that there will be any significant change on scheme fundamentals. For instance, Mirae Asset Emerging Bluechip Fund had anyway 35% exposure in large-cap stocks. I do not think that a change from mid-cap to a multi-cap fund or large and mid-cap hampers performance. But investors can expect a 10-15% change in the portfolio,” said Vinod.
“It is just a nomenclature change. Even though the category of a scheme may have changed but the underlying assets will remain unchanged,” said Nisreen Mamaji of MoneyWorks Financial Advisors.
Vishal Dhawan of Plan Ahead said that investors should not take any hasty decision. “We have been telling our clients to wait for some time. Many investors have multiple folios. Instead of looking at individual schemes, we have recommended our clients to keep the entire portfolio in mind before making any changes to their investment portfolio,” said Vishal.
However, a few advisors have a different view. Lovaii Navlakhi of International Money Matters feels that investors should exit the schemes if they are not comfortable with the changes in the fundamental attributes of the scheme. “Many investors invested in mid-cap funds; however, most of these funds will be now classified as large and mid-cap or multi-cap funds. If investors believe the fundamental attributes of the scheme have changed, they can exit the fund keeping the tax implication in mind. These investors can anyway re-invest in suitable funds through SIPs and STPs. We have already told our investors to exit such schemes and invest in funds with good track record,” said Lovaii.