Mutual Fund Scheme Rationalization

mutual fund scheme namechange


Money is one of those areas that demand high levels of prudence and alertness at all points of time. It is important to have high levels of focus to money-related issues since earning the same is absolutely tough. Particularly when it comes to investing the hard earned money in the right quarters, it is not wrong to assess about the various conditions applicable to the same in a detailed manner. After all, we earn money to live and beyond a point, we start living to earn money.


As any prudent investor would do, we carry out assessments about investments and park our funds in places we feel are safe. We get used to strategies and our faith levels increase in products that have proved themselves as high yield ones. However, we feel jittery when even a small change happens to the quarters where we have parked our money as a ritual for years. One such change that takes us off the hook is the usual product we invest in getting a new name. It requires a little bit of understanding from the Investors’ side to accept the fact that their favorite Mutual Fund product name has changed. The following paragraphs will help you understand the nitty gritties involved in the same.


Why is the name of Mutual Fund products changing?

Why have all Mutual Fund houses become busy in changing their names all of a sudden? What exactly is the use of changing the name of Mutual Fund products?


Mutual Fund products, unlike other types of conservative savings and investment schemes, still remain an enigma to a major portion of Investors. Securities Exchange Board of India, which is popularly known as SEBI among the common public is the body which regulates rules for the Mutual Fund industry. SEBI is involved in categorization and rationalization of schemes announced for the different kinds of Mutual Fund Schemes. This is done by SEBI to help investors understand the Mutual Fund related schemes easily so the benefits attached to the same becomes precise and transparent.


SEBI has insisted Companies dealing with Mutual Funds to drop down the fancy names given to their products for the benefit of general investors. This is applicable to all the existing products also. It is the responsibility of investors to understand the alternate name the product so they don’t feel petrified. Let us look at the reason behind such measures taken by SEBI and how investors can benefit from the same.


Mutual Funds become categorized Funds


  • SEBI has permitted Mutual Fund houses to categorize their products under three main heads namely Equity Funds, Bond Funds and Hybrid Funds.


  • SEBI has released instructions to Mutual Fund companies to streamline the above heads by splitting the same further. For instance, any Mutual Fund company can have 10 types of funds under the Equity category, 16 types of funds under the Bond category and 6 types of funds under the Hybrid category.


  • SEBI has allowed Mutual Fund houses to introduce Solution oriented Schemes, Fund of Funds and Index funds over and above the categorization aspects


  • SEBI, in order to streamline the investment activities of Mutual Fund houses, has defined Asset allocation norms for each category of funds.


  • The rationalization and categorization streamlining of Mutual Funds will help the investors compare the equivalent products in a perfect manner. This was not the situation earlier and comparing products was almost an expert’s job even where the Investor was a common man


  • This measure taken by SEBI has come out in the perfect timing since Mutual Fund has gained tremendous momentum like never before in the previous years. It will help Mutual Fund houses to club different kinds of products under one fund like Large Cap Fund or Focused Fund category and the many others.


Things to do… going forward


  • The Securities Exchange Board of India (SEBI) has released clear instructions to Mutual Fund houses on the rationalization efforts.


  • Mutual Fund houses have started implementing the changes recommended by Securities Exchange Board of India on the end to end aspect of their operations.


  • Two areas where the changes are being made by Mutual Fund houses are changing the names of the existing products and in the strategy to invest the funds accordingly.


  • Mutual Fund rationalization is being carried out based on the unique characteristics of each fund type and grouping. Investors must understand the placement of his existing product and the investment strategy that will be employed for the same by the fund house.


  • The construction of portfolio of different products will decide the risk levels of funds. The investment strategy of the funds will decide the extent of returns from the funds, becoming one of the notable points for the investors.


  • One of the assessments that an investor must make immediately is on the risk-reward aspect of his existing investments. If there is a mismatch between what was anticipated earlier and what he will be realizing after the recent changes, he needs to shift the fund to a suitable one. While doing so, the Investor must take into consideration the capital gains and exit loads that may arise out of the decision.


If you have invested in Mutual Fund products and all of a sudden notice that the names of some products have changed, do not get petrified. Get in touch with your Financial Consultant and understand if the same will create impact in his return on investment. Understand from the concerned Mutual Fund house about the exact impact it may create in your fund status. Mutual Fund houses have given the option to exit or change scheme without Exit Load.


Remember, investing in Mutual Funds is one of the best investment options available in today’s high-cost scenario. Irrespective of the process change brought in by SEBI in terms of categorization and rationalization of Funds, continue investing in Mutual Funds to enjoy the maximum return on your investments.  Last but not the least, there cannot be a better timing to have a relook at your investments than the current one.


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