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.

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. oh and I was counting on HDFC to take the business from Fidelity!

    didnt realize the debt factor, may be we retail investors didnt have access to such information unless the deal is over.

  2. My wife started a SIP from day 1 of Fidelity Equity Fund as her retirement corpous creation vehicle with an aim of not touching for 30 years .I also have 2500 in FEF Growth option for 8 years along with HDFC Top 200 for an equal amount in SIP for next 8 years with sole aim of creating corpous for Higher Education which is 9 years away .I am sure our readers must be there is FEF like me as it was a process driven house ….what should we do ? While our GOALS are Still same …. PARTNER to help us in that is changing and though L and T is a conglometer in Engineering ,am not sure about their Finance Foray…Tricky situation….UR Take Sir ?

  3. The deal as it was originally structured was only for buying the schemes and taking the employees. The employees did not include the fund managers who were based in HK.

    Best thing is to run away from the fund house. L&T Finance has not created any value for anybody ever. So do not think the management team there can do anything.

    Like subra says you will be forced to go to Hdfc, Templeton….There Is No Alternative. The TINA factor. Sad, but true.

  4. Normally the Print Media Experts recommend…Not to jump immediately ,if there is a departure of STAR FUND MANAGER or Change of Hand as the case with fidelity.They recommend to watch scheme performance over a period of time with New Team before pressing reddem…star fund manager Prashant Jain was originally from Zurich and HDFC is numero uno today ,not only because of trust it garnered from Investors by its Performance but Undoubtedly because of Prashant Jain who was completly new in then HDFC MF Team.

    ON L and T- with another Numero uno position in Engneering field with Complete Dominance of Respected Naik sir who built L and T bric by bric . History says Larsen prefers only Engineers at helm,and Yet Respected Deosthali Sir (Known as YMD) is the only person who was at Helm of L and T and successfully at that without an engineering Background and any L and T knows its very very difficult to RISE That way in this Conglometer ( HE is a Finance Man !)……L and T finance as of now had not made much Impact and is not known for Impressive Performance or reach …yet by acquring a SIZE of FIL AUM , it may help YMD to Prove His METAL in HIS FIELD …..Almighty is giving YMD and Team a Chance and Size…..Will They Make MAGIC out of it ,the way Prashant Jain did….Interesting to Note .YMD All The Best…TAKE A BOW !!

  5. Ha Ha Milind you clearly do not know how L&T was built! It has built a fantastic reputation no doubt, but that was in Mr. Desai’s time. Mr Naik is 70 years of age, YMD etc. personally may not be able to handle the Financial Services business. Frankly the only persons who will make money in the L&T financial services are the employees and vendors. Not the shareholders, never the unit holders. God bless you if you think otherwise. Stick to Subra’s choice of Hdfc, Templeton and Naren Sankaran. Frankly the other fund houses do not matter – completely believe Subra’s view though I was skeptical about 18 months back.

  6. Will Fidelity Equity fund be managed by same fund manager under new L&T AMC ? What is the feeling on its performance ? Shall we be continuing our SIPs or stop them ?

  7. I have a bit of money in Fidelity. Fidelity on its own was known for good process. This is bad news. Even if the fund manager is same, the process gets changed. It is one of the reasons which would make people shift to different funds.

  8. Very difficult to say – I think the deal would have been at 5% of aum. If the aum falls, the cost goes up. Pushes the break even further. Fund managers may not stay. This makes it more expensive, but what the hell!!

  9. Sir,

    Let me confess something and probably a lesson for everybody. I invested in SBI when Sandeep shabarwal was fund manager. i did earn quite a lot out of the SBI Tax gain. when he quit, i followed him and started investing in JM Mutual Funds. Trust me, the biggest mistake i made. Later Sandeep Shabarwal Moved to some other fund company. He is one of the best fund managers. What is more important is the Process. I have learnt lesson hard way.

  10. Hi subra

    I am regularly read your blog (in my mail box itself)
    The above happenings shows or makes me to think

    1. Making money thru mutual funds also not an easy job.

    2. Luck is the major(90 percent) factor in investments(It seems to be I am young . I have not seen markets that much . this is my guess). Eventhough we start early (I am 21) and investing there is a possibility that we may not be able to achieve our goals due to either the change in the fund manager or some scams, or some other things.

    I have invested in the ELSS of Fidelity (40000) for the previous financial yr.

    I need to wait with my fingers crossed for the three more years.!!!

    Keep blogging Subra!!!!

  11. Shankar

    subras is already IN .Any reader who is regular knows subras opinions >Fidelity being a process driven house ,it was also in as far as I am concern …stopped my New Money entry in L and T managed Fidelity and Reddemed my ELSS which fortunately completed 3 years….

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>