The landscape of the mutual fund industry is constantly changing. In the last ten years, we’ve witnessed many fund houses have entered the business while some have exited too. As per the records of Association of Mutual Funds in India (AMFI), there were 29 fund houses in April 2006. Ten years later, the number has gone up to 42 in 2016. This doesn’t mean all new fund houses directly set up their offices on day one. A few entered through Joint Ventures, while others took over the existing ones. Mergers and Acquisitions (M&A) have become common these days in the mutual fund industry. Whenever a fund house takes over the assets of another, or picks up the stakes in the Asset Management Company (AMC), the name of the merged fund house or those of its schemes changes. What does it mean for you as an investor?

Mergers and Acquisitions are crucial for the investor, especially if the acquiring company has a different investment style or the approach. However, if there’s no change in the management philosophy and the fund management team, there are unlikely chances that the mergers will affect the performance of your existing investments. Looking at the recent industry trends, acquiring AMCs are usually not keen on bringing in any significant changes as they understand doing so would affect the inflows of funds. However, this does not hold true always. There have been instances in the past where the performance of schemes floated by the acquired fund houses changed dramatically after the takeovers. The reverse is equally true.

This is what you should do
If you are an investor in a scheme that another fund house has taken over, first, analyse its performance. If the acquirer is new to the industry, check out its experience profile in Indian markets. The entrant might be new to the mutual fund business, but it is unlikely that it is new to Indian markets. Ideally, you should give a fund house at least a year to prove its mettle. Moreover, when the existing fund house partially sells its stake to other fund houses, there’s a possibility that it introduces some changes to the investment processes. Smart investors carefully keep track of such changes..

PersonalFN believes the ownership of an AMC plays a significant role in setting up an investment system and processes. The risk management strategies of a fund house set it apart from the rest. Often, well-performing fund houses have watertight risk management strategies. As an investor have a holistic view. Going just by brand names may not yield desired results.

PersonalFN guides its readers and investors in every case of a merger or an acquisition happening within the Indian mutual fund industry. In the recent past, PersonalFN covered the trends in and the impact of mergers and acquisitions. To read more, you may refer to the following articles:
 

• Deutsche Mutual Fund Exits MF Business. What Should Investors Do?
• Edelweiss Mutual Fund Buys JP Morgan Mutual; Here’s The Impact On Investors
• What Next for Investors of Fidelity Mutual Fund Schemes

So next time you see any change in the name of a scheme you have invested in, please do not panic. Remember all the points we have discussed today and cautiously take a call on staying in or moving out.

 

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