SHAILESH MENON, MUMBAI
Fidelity Mutual Fund, which sold its Indian assets under management to L&T Mutual Fund in March, will open a 30-day window from October 15 to allow unitholders to redeem their holdings without a fee. The Securities and Exchange Board of India (Sebi) mandates that mutual funds which have been acquired should give unitholders uncomfortable with a new fund management team the option to pull out without an exit load.
L&T Mutual Fund, part of the engineering-to-construction conglomerate Larsen & Toubro, had acquired Fidelity’s assets under management but did not rope in the fund management team. Now, a big worry for L&T Mutual Fund is that unitholders, who are clients of large foreign banks — big distributors of mutual fund products — may pull out money from Fidelity schemes during the 30-day period.
Top officials of two leading foreign banks said L&T Mutual Fund is yet to garner support from foreign distributors. “We’ve not taken the mandate to sell L&T Mutual Funds as yet. Our audit offices are reviewing the fund house, their processes and performance track record,” said the distribution head of a foreign bank on condition of anonymity.
Foreign banks sell only funds that are approved by their global audit committees, which usually prefer mutual fund schemes with a good track record or those belonging to Indian arms of international mutual funds. While Fidelity Funds appear on the distribution list of most foreign banks, L&T Mutual is a relatively new and ‘undertracked’ fund house.
L&T Mutual officials, however, brushed aside these concerns. Speaking about distribution tie-ups with foreign banks, N Sivaraman, president & wholetime director, L&T Finance Holdings, said, “Revised empanelment process is on. I don’t see why foreign distributors would not want to sell L&T funds.”
The fund management team and risk management of L&T MF have been beefed up to handle large investment inflows, he said. L&T Mutual recently hired Soumendra Nath Lahiri and Shriram Ramanathan as heads of equities and fixed income, respectively. “We’ve a good equities team now... Fixed income vertical has also been structured well,” Sivaraman said. “Critical segments like risk management and processes will be manned by the Fidelity team. There’s no need for investors to worry. Their money is in good hands.”
Some distributors looking to make a quick buck could push clients to redeem during ‘no-load period’ and shift the proceeds to schemes of other fund houses. Rival fund houses are also looking at the ‘no-load’ window closely as fishing out Fidelity’s assets could be a cheaper way for them to acquire some assets.
Fidelity Funds have returned well over the past 10 months and better still after the announcement of asset sale to L&T Mutual Fund. Equity funds like Fidelity Equity, Fidelity India Growth, Fidelity India Special Situations and Fidelity India Value have returned 20-30% since January, Value Research data show.
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