What Should You Do in Case of a Mutual Fund Merger?

Mutual Fund Merger

Managed by skilled fund managers and offering diversification, mutual funds reduce the need for extensive stock market investing experience, making them a popular choice for new investors. If you want to invest in mutual funds, here's your guide. This article will explain what to do in a merger involving mutual funds if you currently have mutual funds in your portfolio.

What is a Mutual Fund Merger?

A mutual fund merger occurs when two or more mutual fund plans combine to form a new plan or merge with an existing mutual fund plan. SEBI regulatory requirements, which prevent asset management companies (AMCs) from overlapping with comparable systems to reduce clutter for investors, are a major reason for mutual fund mergers in India. Some other justifications for mutual fund mergers includes the following:

  • cost rationalization
  • ineffectiveness of a plan
  • Fear, redemption, consolidation, etc.

Top Reasons for Mutual Fund Merger:

Here are some of the top reasons for mutual fund mergers:

  • Low level of performance

Mutual funds sometimes need to be fixed. There can be many reasons for this. It is difficult to hide poor system performance, as its performance should be highlighted in advertising material.

It can irritate investors and drive them away. In such circumstances, AMCs combine the underperforming program with a more effective one. By doing so, the money is redirected to provide better results.

  • Cost justification

Administrative fees are associated with each mutual fund plan. If the costs are too high or cannot be covered by the Fund, the Fund's performance and profitability are immediately affected. The CMA launched new fund offerings in growing sectors to promote its assets under management. Even fund investors are willing to experiment with different ideas. However, investors avoid new products and opt for proven funds when the market is down. Therefore, managing expenses for cash can take time and effort. Therefore, mergers are a good way to cut costs.

  • Takeover by an investor

The exodus of investors is another cascading effect of falling markets. Investors often flee the market in panic in search of safer options. For smaller quantities, it becomes easier. When a fund has a small number of assets under management, AMCs merge it with a larger fund. Allows you to process refund requests.

  • Change fund manager

A qualified and experienced fund manager manages each successful Fund. Much of the credit for the Fund's ability to provide us with consistently high returns must go to its fund manager. The loss caused by the departure of a high-caliber fund manager can be difficult to cover. It may also affect investors in the Fund who had trusted the fund manager to withdraw their money. In such circumstances, the AMC may merge the Fund with a different fund, which has already gained clients' trust.

  • Similar shots

It is one of the main reasons for mutual fund mergers. The AMC may bind certain plans with similar investment objectives or underlying asset classes. By doing so, investor misconceptions are dispelled, and AMC can also significantly reduce costs.

What to do in the case of a mutual fund merger?

There is no need to panic if our Fund merges with another fund. During a mutual fund merger, we need to pay attention to the following issues:

  • Determine the purpose of the merger.

If this happens, we need to determine the reason for the merge. It has a direct impact on how we are going to move forward.

  • Shareholders' reference circular.

We should carefully review the Unitholders' Circular to ensure the new/transferee's plan is consistent with our investment objectives.

  • Check new background

What category does the new Fund belong to? What are the underlying assets of the investments made by the Fund? How has the Fund been used by them in the past? What is AM? We need to review new funds and any subsequent asset allocation revisions carefully.

  • Get details about the new fund manager.

Existing fund managers may only be able to stay once the Fund has merged with another. Therefore, we should find out more about the experience and ability of the new fund manager.

  • See the mandate of the New Fund.

We should understand the new Fund's objectives, successful track record, and investment philosophy. It will help us choose the direction of our investments.

  • Stay tuned for SEBI announcements.

Has SEBI announced the Merging Fund? What are SEBI's recommendations for fund investors? What are the professionals saying? We must keep track of all these factors to make an informed decision.


When two or more mutual funds combine to form a new one is called a mutual fund merger. It has many good and bad things. In the above article, we have discussed mutual fund mergers in detail. If you are new to merger and mutual funds, this article is for you.