The Bandhan consortium acquires IDFC Mutual Fund. What should investors do?

IDFC Mutual Fund is set to be acquired by a consortium including Bandhan Financial Holdings Limited, GIC and ChrysCapital for Rs 4,500 crore. IDFC Mutual Fund has sent out a communication to all of its investors on the big news. Many investors wonder if things will change at the fund house. Here are the answers.

The agreement between Bandhan Group and IDFC MF provides for the continuity of the current management team and investment processes at IDFC AMC. The mutual fund company says the two entities will help unitholders benefit from consistency.

“Bandhan Consortium has expressed their appreciation for our high-quality platform and processes, and are keen to see our business plans continue uninterrupted. Therefore, we do not anticipate any changes in the management of our programs or the IDFC AMC team. Therefore, you should see your investments continue to be managed in line with the current program strategy and with the same discipline that you expect from us,” says Vishal Kapoor, CEO, IDFC Asset Management Company.

IDFC Mutual Fund operates a total of 49 mutual fund schemes across equity, debt and hybrid categories. The fund house, however, is famous for its strength in the debt fund space. Many mutual fund advisors swear by IDFC debt funds.

With a merger, a lot of buzz starts in the market. Past mergers in the mutual fund industry have been marked by a change in strategy, the exit of big names and, as a result, deterioration in fund performance. Mutual fund advisors believe we need to wait and watch in this case as well.

“At first glance, it looks like a clean deal. When a mutual fund takes over another mutual fund, mergers are inevitable due to Sebi rules. In the event of acquisition of a national fund house by a foreign AMC, there is a change of strategy in accordance with the strategy of the acquiring AMC. In this case, Bandhan Bank is capitalizing on the strong fund management team. Bandhan is a bank and wants to enter the mutual fund space with IDFC. There is therefore no direct impact on the fund’s management and strategy. So, for now, mutual fund investors have nothing to worry about. However, we will have to wait and watch if there are any exits in the next 6 months to 1 year due to the management change,” says Arun Kumar, Head of Research, FundsIndia.com.

Finally, don’t do anything in a hurry. This means you don’t have to stop or sell your investments. Wait a moment to find out if the fund house is doing business as usual. Beware of changes in strategy or key people – this would tell you that the new management is planning to change some things. Wait for a clear picture before doing anything.

Dolores W. Simon