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Streamlining Overlapping Funds

To mitigate product duplication, Templeton Mutual Fund has merged many schemes. The fund house took nearly two years in streamlining its products post-acquisition of Pioneer ITI schemes.

Recently, Templeton Mutual Fund has undertaken a huge consolidation exercise. In the past four months, 11 schemes of this AMC have been merged with others having similar investment objectives. Three more funds are due for merger in September 2004. Most of these duplications arose when Franklin Templeton acquired Pioneer ITI Mutual Fund in March 2002, as both AMCs had some products with similar investment objectives. Then the launch of Fund of Funds (FoFs) further increased the product duplication.

One advantage of such scheme mergers is that the history of the merging schemes gets obliterated. Hence, by merging the relatively poor performing fund into those having better performance history, the AMC gets rid of the bad funds. Templeton has exactly done this. Moreover, all the merging schemes of Templeton had a low asset base; hence merging them with a relatively bigger fund (having same investment objective) would reduce the cost and complexities involved in managing them.

Templeton, however, took nearly two years in streamlining its products post-acquisition of Pioneer ITI schemes. Principal Mutual Fund was quicker in extinguishing funds it didn't need. After acquisition of the schemes of Sun F&C and PNB in April-May 2004, Principal mutual fund has merged most of the schemes having similar objectives.

May be, we can see similar kind of exercise taking place at UTI mutual fund in times to come. Why? Because UTI has recently acquired all the ten schemes of IL&FS mutual fund, hence resulting into duplication of many of its products. For example both AMCs have bond funds, gilt funds, liquid funds, index funds and MIPs. Now as a matter of fact, with effect form July 5, 2004, all schemes of IL&FS have been renamed as UTI funds, with a suffix "Advantage" in most of the schemes. For example, IL&FS Bond Fund is now called UTI Bond Advantage Fund.

Franklin Templeton Schemes: The Merger Saga
  Merging Scheme  Merged Scheme  Effective Date
  FT India Index Nifty Franklin India Index 26-Mar-04
  Franklin India Vista Franklin India Prima Plus 02-Apr-04
  Franklin India Balanced FT India Balanced 09-Jul-04
  FT India Gilt - Investment Templeton IGSF Long-term 09-Jul-04
  FT India Gilt - Liquid Templeton IGSF Treasury 09-Jul-04
  FT India AAF Pure Growth FT India Life Stage FoF 20s 16-Jul-04
  FT India AAF Steady Growth FT India Life Stage FoF 20s 16-Jul-04
  FT India AAF Balanced Growth FT India Life Stage FoF 30s 16-Jul-04
  FT India AAF Conservative Growth FT India Life Stage FoF 40s 16-Jul-04
  FT India AAF Inflation Hedge FT India Life Stage FoF 50s 16-Jul-04
  FT India PE Ratio Fund FT India Dynamic PE Ratio FoF 16-Jul-04
  Franklin India Growth Franklin India Prima Plus 10-Sep-04
  Franklin India Taxshield '95 Franklin India Prima Plus 10-Sep-04
  Templeton India Liquid Templeton India TMA - Liquid 17-Sep-04