Fidelity-L&T Mutual scheme mergers – what you need to know

Fidelity Mutual recently announced an exit option for investors pursuant to the merger of itself with L&T Mutual. You may visit http://tinyurl.com/fidelity-merger for details on the name change in schemes and merger of certain schemes of both Fidelity Mutual and L&T Mutual.

But a few schemes of Fidelity Mutual will undergo a change in their fundamental characteristics as a result of this exercise. We would like to run you through those changes. It is important for you to know this as a changed fund strategy or objective may or may not fit into your own goals and purpose of holding the fund. Such changes pertain to three schemes given below:

 1.   Fidelity Global Real Assets Fund

Background

Fidelity Global Real Assets is an international fund that invests in real assets, be its natural resources, factories or real estate through its parent fund (of Fidelity International). As a fund of fund, the Indian fund was not too actively managed as it invested in its parent fund. Hence expenses were low.

Change: hike in recurring expense ratio

With effect from November 16, this international fund will have a recurring expense of upto 2.5 per cent as against 0.75 per cent earlier. It is noteworthy that this fund was investing in Fidelity’s own global fund (feeder route). Now with the two management being different, the investment management and advisory fees is hiked from 0.05 per cent to 0.75 per cent. This is the primary reason for the increase in expense. This will result in more charges on your NAV.

The fund will be renamed as L&T Global Real Assets Fund.

2.      Fidelity India Growth Fund

Background

The fund invests in equities without any sector or market cap bias.

Change: The fund will have a large-cap focus.

The fund will be renamed as L&T India Growth fund and will henceforth focus predominantly on large-cap stocks that fall in the BSE 100 or CNX 100. A few other schemes of L&T Mutual – L&T Hedged Equity, L&T Opportunities Fund and L&T Growth Fund will also be merged with this scheme. It will be benchmarked against BSE 100 from BSE 200 earlier.

3.      Fidelity India Children’s Plan

Background

Fidelity India Children’s Plan is an umbrella fund that houses three schemes – Savings Fund, Education Fund and Marriage Fund. With the merger, the three schemes will be unbundled with the aim of opening it up for a larger universe of investors.

The first scheme, savings fund will be merged with Fidelity Short Term Income Fund and be renamed as L&T Short Term Income Fund. The changes in the second and third schemes are more fundamental in nature.

a. Fidelity India Children’s Plan – Education

Change: all categories of investors can now invest instead of only a minor earlier. Lower exit load.

The fund will be renamed as L&T India Prudence and will be available for investment for all categories of investors as opposed to only a minor earlier. The scheme strategy will broadly remain the same although it is not projected any longer as a children’s portfolio. The fund will invest a maximum of 75 per cent in equities as against 100 per cent earlier. The normal allocation is aimed at 70 per cent equities and 30 per cent debt, like a typical equity-oriented balanced fund.

The fund will have an exit load of 1 per cent if redeemed within a year of investment. This was 3 per cent, 2 per cent and 1 per cent earlier for 1, 2 and 3 years respectively.

b. Fidelity India Children’s Plan – Marriage

Change: all categories of investors can now invest, instead of only a minor earlier. Lower exit load.

The fund will be renamed L&T India Equity and Gold fund and is available for all categories of investors. It can invest up to 90 per cent in equities and at least 10 per cent and maximum of 25 per cent in gold. It can also invest up to 10 per cent in debt. The gold allocation remains the same as earlier.

The fund will have an exit load of 1 per cent in redeemed within a year of investment. This was 3 per cent, 2 per cent and 1 per cent earlier for 1, 2 and 3 years respectively.

4.      L&T Mutual’s schemes

L&T fund holders may note that L&T Contra is being merged with Fidelity India Value and will be called L&T India Value. L&T Hedged Equity, L&T Opportunities and L&T Growth are being merged with Fidelity India Growth to be called L&T India Large Cap Fund – a fund focused on large-cap stocks.

Investors of Fidelity Mutual and those L&T Mutual investors who hold funds that are to be merged will both have an option to exit their funds without any load. The last date for such offer is November 15, 2012. Those who have no objection may continue to hold the fund, without any requirement from their side.