Name change can have different meaning as compared to mergers

Arnav PandyaThere are times when a mutual fund changes the name of its scheme and due to this step the existing scheme will now be known differently as compared to what it was before. The change of the name often leads to the investors being thrown in doubt about their existing holdings and what has happened to it because they fail to spot their fund when they go looking for details about it. There are some details related to a change in name that has to be known by the individual because these are different from other types of action that might have been witnessed with the fund like a merger. Here is a detailed look at why a change in name needs to be considered in a separate manner.Technical changeThere are many occasions wherein a change in the name of the fund is done for technical reasons or to ensure that this is reflective of the reality on the ground. One of the common reasons for a change in the name is that some feature linked to the fund has changed. For example an exchange traded fund might change its name because the name of the index that the fund is tracking has changed. The act by the mutual fund is just to reflect the actual situation and is not due to anything that the fund has done and in such cases the investor should realise that this is the case and that there would be no impact on the fund. The other time when such a situation would arise is when the mutual fund tries to portray the correct picture by ensuring that the name reflects the current situation and here too this might be nothing new. This would be significant as in these cases there will not be any impact for the portfolio or the manner in which the fund is being managed.Post feature changeThere are times when a mutual fund might have changed the manner in which the fund would operate or there might have been a merger between two schemes. In such a situation the fund would have seen its position change from what it was earlier due to these actions. After the basic actions are complete the fund might then decide to change its name to reflect the situation in an appropriate manner. The key here for the investor to understand is that the changes have already occurred in the basic features of the fund and now the name change is a later step which will not have an impact on the working of the fund. Many investors believe that the name change will lead to a change in the operations in the future but in several cases it is the other way round. There have been changes to the basic features which is now requiring the name change to reflect the situation more appropriately.Easy to understandMany names that have been chosen by a mutual fund for their schemes might not reflect the real nature of the fund. This happens because the investors might understand the details in a different manner or the name might suggest something that might not be the reality. In such a position the name change is an attempt to ensure that the investor is able to understand the situation in an easier manner. A better understanding will help improve the investors attitude towards the mutual fund scheme and make them more inclined towards investing in this so this could be main reason why the fund has gone in for the change.