Fund houses are considering scheme mergers after SEBI directives

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Many open-end fund houses have merged their schemes to suit SEBI’s new norms supporting the open-end fund. The Securities and Exchange Board of India (SEBI) clarified late on Sunday that bilateral funds are self-ruling to segregate the way by which they need to suit the revised investment rules for multi-cap funds like merger or conversion to a variegated scheme. 

The first option that they need is to suit SEBI guidelines and intrust 25 percent each in mid- and small-cap stocks. Some say while they’re going to suit the regulations, they might invest in mid- and small-cap stocks for the goody of the investor.

The move came at the Fag end of a tumultuous weekend where multi-cap fund managers spent time discussing the way to implement SEBI’s new rules which asked funds to take a position in 25% of their corpus each in large-cap, mid-cap, and small-cap stocks. Top officials of various fund houses said they might explore the choice of telling their investors to take a position in their large- and mid-cap fund or they might squint at merging their multi-cap fund with their large-cap fund. Some experts say, if need be, they might be willing to return Investors` money if they’re not convinced well enough for putting large scale money in small-cap companies. 

Most of the fund houses have parked funds in big-cap stocks, they’re going to need to exit from these big caps and move funds to mid- and small-caps.  

According to a senior executive of a large fund house, the fund is considering to include returning money to clients and seeking a switch to other funds with the assistance of partners, merging multi-cap fund with large-cap or large- and mid-cap funds to take care of the investment process and portfolio quality and converting multi-cap fund to thematic fund like ESG fund to take care of investment process

AMCs were considering the conversion of multi-cap schemes into thematic schemes, which don’t have any investment restrictions. The last option would be to shut down the multi-cap schemes and return the cash to investors. These decisions will however depend upon SEBI’s approval.

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