Product line ups getting
leaner as fund houses merge schemes, often merging schemes that have different
investment mandates.
Mumbai: Life is set to get easier for advisors and investors alike as fund houses merge their equity schemes often those with different investment mandates. The move may prove beneficial for investors stuck in non performing schemes. Merging sector funds or theme based funds into a diversified equity fund allows fund houses to broaden their investment objective and in turn provide better returns.
|
From |
Into |
|
DSP BR Savings Manager
Fund–Conservative Plan & Moderate Plan |
DSP BR Savings Manager
Fund-Aggressive Plan |
|
UTI Variable Investment scheme |
UTI Balanced Fund |
|
JM Agri & Infra Fund and JM HI
FI Fund |
JM Basic Fund |
|
JM Financial Services Sector Fund,
JM Telecom Sector Fund and JM Large Cap |
JM Equity Fund |
|
JM Contra Fund, JM Mid Cap Fund and
JM Small & Mid Cap Fund |
JM Multi Strategy Fund |
|
JP Morgan India Alpha |
JP Morgan India Treasury Fund |
|
ICICI Prudential Fusion Fund, ICICI
Prudential Equity Opportunities Fund and ICICI Prudential Fusion Fund –
Series III |
ICICI Prudential Dynamic Plan |
|
Principal Pnb Long Term Equity Fund
|
Principal Emerging Bluechip Fund |
|
JM Nifty Plus Fund |
JM Equity Fund |
|
JM Emerging Leaders Fund |
JM Multi Strategy Fund |
|
BNP Paribas Opportunities Fund, BNP
Paribas Sustainable Development Fund & BNP Paribas China-India Fund |
BNP Paribas Equity Fund |
|
HSBC Floating Rate Fund – Short
Term |
HSBC Cash Fund |
|
Franklin FMCG Fund and Franklin
Pharma Fund |
Franklin India Prime Plus |
|
Franklin India Index Tax |
Franklin India Index Fund – NSE
Nifty Plan |
|
L&T Global Advantage Fund |
L&T Growth Fund |
|
L&T Multi-Cap Fund &
L&T Small Cap Fund |
L&T Opportunities Fund |
As of August 2011, there are
approximately 391 open-ended equity schemes including ETFs and index funds in
the industry.
“Investors stand to benefit if some
non performers are merged into better performing schemes,” says Aashish
Somaiya, Head, Retail Business, ICICI Prudential Mutual Fund.
The mergers are happening among the
funds which do not have huge assets under management. “If the fund is unable to
collect adequate inflows and if it is unable to perform then the management of such
schemes becomes a problem. One of the key reason for merger is to cover-up
their underperformance and to broaden the fund’s investment objective.
Close-ended funds are being merged when they are about to mature. Investors are
given an option to exit and usually 70 percent of investors opt for
re-investment in the proposed scheme and the rest move out,” says a sales head
of a leading AMC.
The flip side of scheme merger is that
investors have to incur capital gains tax since the scheme which is getting
merged has to redeem its investments. Cafemutual
first reported that AMFI had requested the finance ministry to align tax laws
with that of corporate merger to save investors from paying capital gains tax
on account of scheme merger. (Read here: MFs against tax
on scheme merger)
According to AMFI, the finance ministry has not responded to its request yet.
Over the years, fund houses have been
manufacturing flavor-of-the season products to capitalise on market fads and
rake in the moolah. Concerned over the plethora of schemes, SEBI encouraged merger
of schemes having similar objectives last year.
Cafemutual had first reported that scheme merger would
gain pace. (Read here: Scheme mergers
to gain momentum)
SEBI has recently become strict in allowing
fund houses to launch schemes which have little differentiation to offer as a
majority of funds end up investing in the same stocks.
Tell us what you feel.
