Premium| Listen to this article |
MUMBAI: Kotak Mahindra Asset Management Company on Monday announced the merger of its Fixed Maturity Plan (FMP) series 245 with Kotak Corporate Bond Fund. The FMP was launched on 21 September 2018 and has delivered 7.8% returns since inception. It has assets of about Rs144 crore.
Last month, the AMC merged Kotak FMP Series 242 with Kotak Corporate Bond Fund, as reported by Mint.
The Securities and Exchange Board of India (Sebi) has banned Kotak Mahindra AMC from launching any FMPs for a period of six months. Axis Mutual Fund has also announced the merger of its Equity Advantage Fund Series I scheme with Axis Flexicap Fund. The scheme had assets under management (AUM) of ₹1,443 crore at the end of August and has given returns of 13.20% since launch.
The mutual fund industry had an AUM of Rs15,776 crore in close ended equity schemes and Rs61,081 crore in close ended debt schemes as of August, according to data from Association of Mutual Funds in India (Amfi).
The merger of close-ended schemes may help many AMCs retain this maturing AUM. On maturity of a close ended scheme, the entire investment amount along with any accrued gains has to be returned to the investor. However, in case of merger, only investors who actively opt for redemption are given back their money.
"Axis Equity Advantage Series 1 was a flexicap fund and it is being merged into an open ended scheme of the same category run by the same fund manager. Investors were given a 1 month exit free window to redeem their units. A merger does not attract any tax liability on investors unless they redeem their units. Fresh exit load does not apply since the date of investment is counted as the date of investment in the original scheme. So it is a win-win for all investors concerned," said Ashwin Patni, Head of Products at Axis Mutual Fund.
Patni said investors can redeem their money from the open ended scheme that the maturing fund is being merged into, at any point of time. However, some investors feel short-changed by this process due to gaps in communication.
"Investors in close ended funds typically have a certain time frame in mind. If they are not informed sufficiently clearly through both direct outreach by the AMC and intermediaries like distributors and RIAs, they may not be in a position to take an informed decision on a merger. It can leave a bad taste in the investor's mouth. AMCs need to be extra careful about both communication and ensuring that the two merging schemes are not substantially different in style and mandate," said Amol Joshi, founder, Plan Rupee Investment Services, a mutual fund distributor based in Mumbai.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!
