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Fidelity and L&T AMCs’ Merger-Should you use the exit option?


Fidelity Asset Management Company has been recently acquired by L&T Mutual Fund. As a result, a few schemes of Fidelity MF are all set to merge with L&T MF effective 16th November 2012.

The following are the schemes to be merged –

Fidelity Flexi Gilt Fund with L&T Gilt Fund

Fidelity Wealth Builder Fund-Plan A with L&T Monthly Income Plan

Fidelity Wealth Builder Fund-Plan B & Plan C with L&T MIP – Wealth Builder Fund

L&T Contra Fund and Fidelity India Value Fund to form “L&T India value Fund”

L&T Hedged Equity Fund, L&T Growth Fund and L&T Opportunities Fund and Fidelity India Growth Fund to form “L&T India large Cap Fund”

Exit Option

Both the AMCs have provided investors with an option to exit without paying any exit load between October 15, 2012 to November 15, 2012.

Fidelity vs. L&T-

Fidelity AMC has established itself in this space as one of the leading Asset Management Companies; with most of their schemes having performed well compared to their peers.

L&T is a well known, trusted and respected brand in our country. It has recently shifted its focus on the financial services industry and is a relatively new player in this area compared to Fidelity.

Past History of such mergers-

Even in the past, such mergers have happened – HDFC took over Zurich and Birla Sunlife acquired alliance AMC. These went through smoothly without adversely affecting  the investors.

Changes and Challenges-

Fidelity is known for its consistency of performance and creating value for its investors over the years. The change of ownership would also bring about a change in Management (though not all the fund managers will be replaced) and the AMC’s  future performance would now depend on this management team.

Does it make sense to use the exit option?

Keeping in mind the above, the decision whether to make use of this exit option depends on these factors-

  • The relative performance of the scheme and the time elapsed since investment-If the scheme has performed well and you are in profit and the investment is over a year old, you can exit at a profit and without any tax liability.
  • If your investment is less than a year old and you are at a notional loss, it is advisable to hold on to the investment for sometime and give the scheme and  L&T AMC sometime to prove itself.

Disclaimer

The views/opinions expressed in this review are solely those of the author and do not constitute any kind of recommendation.

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