HSBC intends to merge the operations of L&T MF with its existing business in India

HSBC Asset Management Company and L&T Finance Holdings recently entered into an agreement that the former will buy the mutual fund unit of the latter. Going ahead, HSBC intends to merge the operations of L&T Mutual Fund with that of its existing asset management business in India.

Here, we look at what it means to existing investors in both funds.

L&T Mutual Fund has 27 actively managed funds—10 in equity, 13 in debt and four in hybrid category—with L&T Triple Ace Bond (corporate), L&T India Value and, L&T Emerging Businesses Fund (small cap) being the top schemes in terms of assets being managed.

HSBC Mutual Fund is comparatively a small fund house with eight schemes each in equity and debt category and two in hybrid. The fund house also has a few fund of funds investing in overseas/domestic markets.

Both the AMCs currently have about 17 schemes in common.

But post Sebi's scheme categorization rules, mutual funds can have only one open-ended scheme in each category.

Thus, once L&T MF is acquired by HSBC, the overlapping schemes of L&T will be merged with similar schemes in HSBC or vice versa, for which we do not have substantial information at this point of time.

The investors of the scheme that is getting merged will be issued units of the scheme with which the former is merged. Say, if L&T Flexi Fund gets merged with HSBC Flexi cap, investors in the former will be given units of the latter.

But before that, investors will be given a notice of the proposed changes and the option to exit the scheme at the prevailing net asset value (NAV) without paying exit loads, if they do not want to continue with the new scheme.

Note that both the fund houses provide an ELSS (equity-linked savings scheme), or tax-saving scheme that comes with a lock-in of three years. Those with investments within the lock-in period may not have an option to exit but to stay with merged scheme.