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Last Updated : Oct 12, 2019 08:51 PM IST | Source: Moneycontrol.com

Mutual funds wrap: Would SEBI direct BoB and BNP Paribas MFs to consolidate schemes post merger?

In December 2017 SEBI pushed further steps towards schemes consolidation through a Categorization and Rationalization of schemes within an AMC to keep clear cut distinct and simply understandable schemes.

 
 
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State-run Bank of Baroda-owned Baroda Asset Management Company (AMC) and BNP Paribas AMC on Oct 11 announced merger to form an asset management joint venture.

However, the merger is subject to regulatory and other legal approvals.

BNP Paribas Asset Management Company  is a subsidiary of BNP Paribas Asset Management Asia.

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It is a merger of two fund houses and not an acquisition. However, the press statement did not make a mention of how much percentage stake each fund house will be holding.

The merger will allow both the companies to leverage each other's strengths and offer products for retail and institutional clients, BoB said giving any financial details of the deal.

BoB mutual fund (MF) has current assets under management (AUM) of Rs 10,000 crore plus and BNP Paribas MF has another Rs 9,700 crore plus.

The scaling up of AMCs to stay profitable has driven recent buy outs. But a merger shows that both these MFs want to remain serious players with larger AUM size.

Expectedly the merger would benefit from larger network of BoB and global investment expertise BNP Paribas MF.

But the question remains whether SEBI's approval comes with a condition of consolidation of similar type schemes of the two AMCs following the merger.

As such the two players are surely looking to scale up post merger.

To help scaling up of schemes and do away running duplicate schemes of small sizes, SEBI, in 2010, had released a circular for scheme mergers that removes compliance costs and exit option of the scheme that remains post such mergers and only merging schemes need give exit option, said an ex SEBI DGM who was with its mutual fund department at that time.

In December 2017 SEBI pushed further steps towards schemes consolidation through a Categorization and Rationalization of schemes within an AMC to keep clear cut distinct and simply understandable schemes.

It's likely while giving NoC to handshake approval between BoB MF and BNP Paribas MF, SEBI will broach consolidation action of schemes from investor viewpoint.

However, merger of two mutual funds being a fundamental attribute change, both side investors may get an exit option, opined the ex SEBI officer.

How many investors use exit option and how many long term investors stay on to see the benefits of this AMC level merger in the operation of their schemes, will be interesting to watch for.

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First Published on Oct 12, 2019 08:50 pm
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