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Last Updated : Apr 11, 2016 10:43 AM IST | Source: Moneycontrol.com

Getting ready for more mutual fund mergers

Investors must keep a track of the mutual fund scheme mergers going forward. It will help them effectively track their portfolio performance.

Arnav Pandya

The market regulator has once again made it clear for mutual funds that they should not be having multiple schemes that have the similar features in their product line up. Already mutual funds have merged several of their offerings but still there are a lot of fund houses where they still have a large number of funds in their portfolio. This could well change going ahead and it would be another point of action for the fund houses. Already one part of the activity has been curbed as it is not easy to get new funds cleared unless they are radically different. This entire situation could have an impact as far as the investor is concerned and here is a look at how they can deal with it.

Change of holding

One aspect that a lot of investors would face is that they could witness a change in the nature of their exposure. If they have an existing holding then they should keep a close watch on it because it could be involved in a merger with some other fund. There are two ways in which this can happen and the impact of each of them too would be different. If the fund of the investor is merged into some other scheme then the investor will get units in the other fund. This can change the nature of the investment if the exposure or the portfolio of the new fund would be different from what the current one is. The good part is the move of changing the holdings from one fund to the other will not involve any capital gains impact because this was specifically kept out of the tax net in last year’s budget.

The other way in which this situation would play out is when a fund is merged into the fund where the investor has a holding. This does not impact the existing investor as they continue to hold the units of the fund and things continue to run as usual after the merger.


An area of concern for the investor could be the choice that they face when they go out to invest. Currently there is a long list of schemes that are present in the market and the choice can be made between them. If there are a large number of changes and many of them are closed down then this could lead to just a few funds being available and if these are also similar funds that are present across fund houses then the interest of the investor could even wane further. This is possible if there is too much attention to just the reduction of the number of schemes. This is due to the fact that there are a lot of funds that might seem to be same but are different in a small way in terms of the manner in which they manage the funds or the composition of the portfolio.


The investor would need to follow the details over the next several months carefully especially in terms of whether there is some change related to their funds. This will help them to analyse the impact and then make some changes in the portfolio if it is required. This is important because unless this is done the investor might not even know about some changes that have occurred and this would not be a positive thing since the exposure of the portfolio would not be clearly known. This will require some additional work in the days ahead but if they set up alerts then it would be easier to deal with any change that occurs and that too quickly.
First Published on Apr 11, 2016 10:43 am