No clue how the market will react to this news of Fidelity being taken over by L&T Mutual Fund!
I have had a couple of calls from investors in equity schemes who may pull out their money. However Fidelity has a lot of institutional debt which may not panic from this change of management.
It looks like L&T Mutual fund will take over the schemes of Fidelity and this will catapult L&T MF into the bigger league. AS originally heard the fund managers of the equity schemes were not supposed to be part of the deal. Not clear about this, and again not clear how it will work. I do remember that Hdfc had negotiated a ONE year term for using the terms ‘Zurich Top 200’ and Zurich Equity Fund. However, if I remember right they used it only for 6 months.
The Aum that L&T Mutual fund has is Rs. 4700 crores. The Aum of Fidelity is Rs. 2300 crs in debt and Rs. 5600 crs in equity. Assuming all the investors decide to stay on, the Aum of L&T mutual fund will be Rs. 13, 600 crores. This gives it a good ranking and a decent corpus to do some activity. All the best Y M D and team.
There are 2 issues in my mind.
Debt: Institutional Debt: Assuming that Ongc has Rs. 100 crores in Fidelity and Rs. 100 crores in L&T. Will they keep Rs. 200 crores in the new entity. NO. They will not. So some of the institutional debt investments will go – and so will the fees.
Retail debt: will be FMPs. This money will hopefully stay till redemption. Not sure how L&T Finance is going to handle this. Not easy.
Equity: Investors are fussy over fund manager names and track record. Fidelity scored well with investors, but not with IFAs. Most IFAs will try to pull the money to other performing schemes. The Marketing team of L&T Mutual fund will have a tough time retaining the folios and the money.
My advise? hmmmm no comments.
This is not a bad deal for the employees of Fidelity -but they may have to come down a bit on salaries…watch this space.
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