Scheme Name Change after Recategorisation

When investors sit to review their mutual fund schemes, they will notice some of the schemes that they held have merged or their names have changed.

1. Why have names of some mutual fund schemes changed?

Names of some equity and debt mutual fund schemes have changed as fund houses align them to comply with the directives of the Securities and Exchange Board of India (SEBI). As per the mandate, a fund house can offer 10 types of equity funds, 16 categories of bond schemes, and 6 categories of hybrid funds. In addition to this, they can also have index funds, fund of funds and other solution based schemes.

2. What is the outcome of this SEBI ruling?

Based on this mandate by the regulator, fund houses have completed the exercise of re-categorisation of their existing open-ended equity mutual fund schemes. Consequently investors will notice names of some schemes have changed, while some have merged.

3. What should investors do now?

This exercise by fund houses has come to an end. Investors will now have to see the impact of this on their portfolio and readjust them in line with their asset allocation. For example, if an investor holds a large-cap fund which post reclassification becomes a large and mid cap fund, could see his large cap allocation go down and mid-cap go up. Many mutual funds have just changed or altered the name to comply with the regulatory requirement. In such a case one could stay put in the scheme. Financial planners believe investors should not rush to make changes to their portfolios immediately. They should also keep in mind the taxation impact and exit load impact before rushing to make changes to their portfolio. As funds move to the defined categories, merge schemes, investors will have to see the overall impact on their equity and debt portfolios. They will have to recalculate their exposure to large-cap, mid-cap or multi-cap schemes and decide whether they need to make any changes to tune their portfolio in line with the new classification.

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