Fidelity had around 19 Lakh customers and more than Rs 8,900 crore as asset under management and so it would impact a large number of investors. But before you get into the technicals, let us start with clearing some basic concepts. What is being sold is the stake of the asset management company (AMC). The investors’ money is in the mutual fund, and is secure with the custodians. The price paid and the accumulated losses are all not on the balance sheet of the schemes. Investors will be impacted qualitatively by the transaction, since their trustees and fund managers will change. There is no quantitative impact. The NAV of the funds will continue to be valued based on the market price of what is in the portfolio. There will be no mark-up or mark-down due to this sale. So there is no worry on this part.
The concerns for most investors may be:
Wait and Watch! The deal is awaiting approval from Market regulator SEBI, after which investors in Fidelity’s schemes will be given a 30-day notice to quit if they so wish, without any exit load. Those who do not exercise the option will move to the new management. L&T Mutual Fund would also communicate the new acquired investors about which fund will be merged into which one, what the new names will be, and which funds may be closed.
Investors in Fidelity Tax Saver, where a period of three years is not over since investing, will not be able to exit due to mandatory lock-in. They will move into the L&T Tax Saving Fund by default.
There are funds that were floated by Fidelity, which were investing abroad, and using feeder funds. Investors in these funds – Fidelity International Opportunities Fund and Fidelity Global Real Assets Fund may be at risk.
So, wait for L&T communication and then decide if you would want to stay or move on to some other Mutual Fund.
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