Weak market has brought in an era of consolidation in the mutual fund industry...
25-Jul-2013 •Research Desk
Time was when launching new equity schemes was run-of-the-mill activity. And why not. Markets were doing well and everybody was joining the bandwagon.
But starting year 2011, the pattern has reversed. The “deaths” have outnumbered the “births” of new schemes on an yearly basis. This stretch of last 3 years has seen only 32 new schemes being launched, with ICICI and Motilal Oswal leading the pack with 3 schemes apiece. But strikingly, 49 schemes have ceased to exist, as in, have been merged into existing ones or have lapsed altogether.
JM Financial MF (10), L&T MF (7) and Tata MF (6) are the leaders when it comes to most number of schemes merged by a fund house, since 2011.
All this is in strike contrast to the period from 2008 to 2010 when 146 equity schemes saw light of the day and just 17 breathed their last. This includes the bull run of 2009 and 2010 which saw 67 new schemes being launched and only 10 closures.
• The returns from the equity market have been a drag. S&P BSE Sensex and CNX Nifty have lost 1.52 per cent and 1.01 per cent respectively
• An average fund, in any of the diversified equity fund category, is in red; since 2011
• The appetite for any new schemes is considerably low, which has dithered fund
houses to launch new schemes
• The Indian economy has also slowed down considerably. It grew by 6.21 per cent in FY12 and by 5 per cent in FY13, the lowest in a decade
• The Indian MF industry has also got into a consolidation mode, with Sebi taking a tough stand on approving new schemes unless the new scheme is different from any of the existing ones of the same fund house
• In late 2010, Sebi also relaxed the MF merger guidelines, which allowed the fund house not to give an exit option to the unit holders of its surviving scheme, if there was no change in the fundamental attributes of that scheme, paving the way for fund houses to merge their non-performing schemes with others
• The cost of merging schemes has also come down substantially from June 1, 2013, as the STT has come down to 0.001 per cent from 0.250 per cent which was levied when the units of scheme being merged were sold and then new units of surviving scheme bought