HDFC Asset Management Company (AMC), India’s third largest mutual fund house with assets of over Rs 4.63 lakh crore, has written to the unitholders of all its schemes about the change in control and sponsorship of HDFC Mutual Fund. This change is set to occur through a proposed amalgamation process, subject to regulatory approvals.
Why the change of control?
HDFC Investments and HDFC Holdings, both wholly owned subsidiaries of Housing Development Finance Corporation (HDFC), will be merged into HDFC. These mergers are triggered by the impending merger of HDFC into HDFC Bank. After these mergers, the surviving entity will be HDFC Bank. This will result in a change in the control and sponsorship of HDFC MF, with HDFC Bank becoming the new sponsor instead of HDFC. HDFC and Abrdn Investment Management are the co-sponsors of the fund house.
Does that impact HDFC MF?
The merger proposed and the resultant change in control and sponsorship will not impact the day-to-day operations of HDFC MF. There will neither be any changes to the names of the mutual fund schemes managed by HDFC AMC nor will there be any changes in the investment objectives of the schemes. HDFC AMC continues to manage the schemes and the management personnel including the fund managers will not be affected due to this change.
To be sure, HDFC MF earlier this year had given a ‘Load-free exit option’ for unitholders between February 10, 2023, and February 24, 2023, as co-sponsor Abrdn Investment Management proposed dilution of stake to below 10 percent.
Now, due to the change of sponsorship and control arising out of the creation of one entity under HDFC Bank, the fund house is bound to offer a ‘load-free exit option’ to the investor. As per mutual fund regulations, the fund house has allowed such a window from May 25, 2023, to June 23, 2023. In this period, the investors can sell their units to the fund house and get their money back at the prevailing NAV, without paying an exit load, if applicable. Though, it is not binding on the investors to exit.
What should you do?
The reason why the fund house has given an exit option to investors is that a change in the sponsor constitutes a significant change in the lifecycle of a fund house. Or as the mutual funds’ laws call it: a fundamental attribute.
The good news is that the fund house will continue to remain within the HDFC Family. The change of sponsorship and control does not change much for the investors holding units of various schemes of HDFC MF. So, if you are happy with your investments, then you may continue to hold on to them and even add to them in line with your investment plan.
If you wish to reallocate your assets, given the high markets, this is also a good occasion to do that. Your sale of units of schemes of HDFC MF till June 23, 2023, will not attract any exit load. Keep in mind the capital gains tax, though.