Market regulator SEBI (Securities and Exchange Board of India) rule is preventing Fidelity Mutual Fund from launching new schemes, according to media reports.
The rule says that asset management companies (AMCs) undergoing a change in ownership are not allowed by SEBI to launch new schemes. At present, Fidelity Mutual Fund is being acquired by L&T Mutual Fund.
In March, L&T Mutual Fund announced the acquisition of India assets of Fidelity Mutual Fund. L&T Holdings bought Rs. 88 billion of assets under management (AUM), including debt, from Fidelity. Before the acquisition, L&T handled Rs. 39 billion of AUM, primarily fixed income.
Since then, Fidelity has terminated some of its debt schemes that were nearing maturity and has not reinvested a few fixed maturity plans that came up for redemption. Usually AMCs launch new debt schemes to reinvest from a fund that's nearing maturity.
The AMFI (Association of Mutual Funds of India) data, Fidelity's assets under management have declined to Rs 73.78 billion in end June from Rs 86.88 billion in end March.
Currently, Fidelity Mutual Fund is in a transition phase and would lose assets. The Fidelity-L&T acquisitions deal is waiting for SEBI approval. According to the rules, investors are given a 30-day window to exit without a penalty. Investors may prefer to stay away from the fund till there is clarity on investment strategies used by new fund managers.