Tuesday, April 17, 2012

Do not exit Fidelity MF in a panic

Jharna Bhiwandiwala stopped her monthly investments in Fidelity schemes through systematic investment plans after L&T Mutual Fund announced acquiring the assets under management of Fidelity MF in India. “I stopped my SIPs in Fidelity’s equity funds since its managemnt team was not part of the acquisition and the performance of equity schemes of L&T Mutual Fund did not provide me the desired comfort on its fund managers,” she said.

There are many others who are thinking on similar lines but going by the facts, taking such a decision in haste may not be a good idea. Express Money provides you five reasons why you should not exit from your Fidelity investment.

The Deal is yet to get Sebi approval

Before you decide to exit, keep in mind that the regulator (Securities and Exchange Board of India) has yet to approve this acquisition which involves the sale of assets under managemnt by a foreign fund house to a domestic firm without its equity management team. So, while you have your concerns, the regulator may also have some queries and hence you should wait till the approval comes.
Fund managers may be there for some time

While the equity fund managers are not part of the deal, they will actively be around for almost two years. The approval will come in three to six months and then the transition period may take another six to eight months.

“L&T MF has demanded that equity fund managers of Fidelity should stay for around one year after the transition is complete or till their own fund managers are comfortable with it. Taking everything in consideration, equity fund managers of Fidelity will manage the affairs for atleast two years from now,” said a source close to the development.

Existing processes may continue
Experts say that Fidelity will share its standard fund management processes with L&T in the transition phase and there is likelihood of continuity in the equity schemes for now and hence investors should not take a decision in haste. “There is nothing that should trigger redemption,” said Dhirendra Kumar, MD, Value Research. “Investors should wait how things evolve at L&T and past in not necessarily a reflection of the future. There is also a possibility that some equity fund managers of Fidelity join L&T MF.” Experts feel that L&T has got the money to hire good fund managers.

Be careful when your distributor asks you to switch
While investors are apprehensive, distributors may ask you to switch over to other fund house as it tends to benefit them.

A switch-over allows them to make some extra money on your investments and thus do not go by your distributor’s advice in this case. Market experts say that competitors would try to take advantage of the situation and try to lure Fidelity’s investors to them.

Wait for Fidelity to come out with exit option
Experts say that if you redeem your investments with Fidelity now, you may have to pay an exit load of 1 per cent and also capital gains tax (short term tax) in case the investment is not more than one year old. However, once the deal gets Sebi nod, then as per the regulations Fidelity will have to come out with one month exit option from their schemes without charging any exit load and that will be a good time to exit if one has decided to exit in any case.

Source: http://www.financialexpress.com/news/do-not-exit-fidelity-mf-in-a-panic/937080/0

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