Xpressions - XI - Indira Institutes

stay away from novelty. However, AMC’s have fixed and
variable costs carried over from the market heyday, but which
they probably can’t afford to bear anymore. “One shouldn’t
forget that after the mass redemptions in 2008, the outflows
weren’t adequately replenished later. These schemes were most
likely no longer capable of carrying the load of an entire fund
management team,” says Kumar.
Clearly, amalgamation of schemes is an easy option to trim
down the costs. “Mergers economise the administrative costs
and those of servicing the customers. The time and resources
spent on managing the portfolio also reduce,” says Thomas.
“Taking advantage of SEBI’s observation, AMCs that are
saddled with a plethora of schemes launched during the NFO
mania have chosen to merge them,” says Pai.
What you should do:
If your fund has been doing well, opt out of the merger. This is
because a fund house that tries to reduce its costs at the
investor’s expense by forcing redemption in a volatile market
doesn’t have your interests at heart.