SBI Mutual Fund to merge two schemes: Reports

However, no information is available on the names of the schemes

June 25, 2012 12:01 IST | India Infoline News Service
SBI Mutual Fund will soon be merging two of its schemes as it has received SEBI’s (Securities and Exchange Board of India) approval, according to media reports.
According to the fund house, it has received the approval for merger of its two schemes from the SEBI recently, for which it has applied for quite some time, the reports added.
However, no information is available on the names of the schemes. The market regulator said it would allow merger of schemes to avoid overlapping and ensure better returns to investors.
Concerned over non-performance of some schemes over a long period of time, SEBI chairman UK Sinha had said that fund houses need to look into the matter and consider the merger of some schemes.
SBI MF said a merger of schemes is usually beneficial to investors. The fund house added when a merger is done, it is normally between a non-performing scheme with a performing one, which is beneficial to investors. Also, if investors don’t want to be part of the merged scheme, they can do so without paying any exit load to the fund house. SBI MF will follow all kind of due diligence before applying for approval.

Suresh Sadagopan, founder, Ladder7 Financial Advisories, elaborated, “It is necessary for a fund house to do this as maintaining too many separate schemes which have small AUMs (assets under management) is a problem for them and costs money.”
He further said, “It makes sense for fund houses to merge schemes with small AUMs which do not stand much potential to scale up. Normally such small schemes are merged into bigger schemes which are better performers. Hence, it is not a bad thing for investors. They anyway have an option to exit without any loads, if they don’t want their scheme to be merged with another scheme.”
Pankaaj Maalde, head-financial planning, ApnaPaisa.com, said, “More number of equity schemes creates confusion and it is difficult for investors to track the performance of all existing schemes. It is a good move to merge the schemes and reduce the number of schemes in portfolio. But before knowing which two schemes are likely to merge, it is difficult to comment on the same specifically.”
He added, “Performance of half of the SBI MF equity schemes is not good and are behind its peers. Recently, the SEBI chief has shown his concern over underperformance of some schemes and has indicated some action against such schemes.” 

SBI MF added that the fund house has no plans to launch a new fund offer (NFO) in the equity space in the current financial year. But, the fund house would come up with debt schemes, especially fixed maturity plans in FY12-13.
SBI MF, which is one of the top fund houses in India, has an AUM of more than Rs. 420 billion by FY11-12.

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