What should investors do with Fidelity Funds?

Another deal struck in the mutual fund industry – L&T Finance is taking over the Fidelity Mutual Fund Indian business. After months and “if”, “what”, “who” finally the picture is clear for the investors who hold more than 8500 Cr of assets.

Fidelity Mutual Fund – Run Out

But this is just not the owners or the managers that will change. There is lot more for the investors of Fidelity MF. Change in management brings lot more challenges and they all have the bearing on the performance of the fund. After all you invested for returns and not for the corporate daily soap featuring mergers and the take overs.

What should investors do with Fidelity Funds?

When you should sell your Mutual Funds?

In a nut shell one can exit his investments in mutual funds if:

  • Your life-cycle stage has changed impacting your risk profile
  • If the expense ratio of the fund rise
  • If there is a major change in the attribute of the fund
  • If the fund manager is changed
  • If fund is not complying to its objectives as laid down

If you see there is a likely possibility that the fidelity investor may face few of these. In the current scenario we assume following things will happen:

1)      As per media reports the deal is “with employees” but without Investment Team as fidelity wish to keep their investment professionals as they are into research for their parent company regarding the markets of Asia-Pacific region. Hence the investment team will manage the funds for brief time and will completely hand over the funds to L& T.

2)      Also media reported that Fidelity had a high cost structure. And majority of it was on employees. How does management deal with this is yet to be seen. But this will be a tough job, accommodating high cost manpower in the scenario when industry is all guns to reduce cost as margins have shrunk owing to the regulatory changes which have reduced the business for small & mid-size mutual fund companies.

3)      We will see huge turnover in both equity and debt category. Majority investors in equity invested for the brand ‘Fidelity’. Institutional investors will also redeem as they will refrain from doubling exposure in the resulting one mutual fund company. So performances will be impacted.

4)      If you see L&T, they have not created much value for investors in past. They have grown inorganically as they first acquired DBS Cholamandlam AMC and now Fidelity. This is a huge challenge for L&T team to retain Fidelity assets, with present performance and structure.

Fidelity Mutual Funds Performance Vs Sensex





BSE Sensex





Fidelity Equity





Fidelity India Growth




Fidelity India Special Situations





Fidelity Tax Advantage





These are hard times but with challenges one also gets opportunities.

  • Fidelity assets are major into equities and with this kind off assets L&T can attract good fund managers.
  • Similar challenges were faced by HDFC AMC and Birla Sun Life AMC when they took over Zurich and Alliance AMC. And these AMCs have created value for the investors.

Few Such Deals in Past

Source Business Standard

So it will be exciting times to watch as this entire merger may take few months or so subject to necessary approvals and due diligence.

Commenting on the transaction, Ashu Suyash, MD, Fidelity India said,

“The foundation that underpins this transaction is the shared values of L&T Finance and Fidelity and the high standards of business ethics that both Groups value and cherish. The business models of L&T Mutual Fund and Fidelity Mutual Fund are complementary, thus creating strong synergies. I am happy that business continuity has been addressed with the team moving along with the assets – this will help us continue serving our investors and our distributors with the same levels of commitment as they enjoyed over the past 8 years.”

Investors will be given a one month no exit load window by SEBI but this is going to be a very tough decision to exit or stay in the same funds.

Are you a Fidelity or L&T Mutual Fund investor? If yes, share your views or post anything which you feel discussing.


  1. Hi Hemant,

    Well yes.. I am a Fidelity investor and started my SIP in fidelity Equity fund 10 months back.. I am quite happy with this fund and actually wanted to continue with this SIP for long term i.e around 10-15 yrs.. But with L & T taking over..I am a bit confused what to do and what not to do..because I am not at all comfortable with L & T brand as far as mutual fund sector is concerned.. Need your opinion on this Hemant..shall I wait for sometime more n see how L & T performs n then take a decision or just quit with Fidelity Equioty fund and go with some other large Cap fund?

  2. I have invested in Fidelity tax advantage 6 months back.
    will i be able to exit if i want or i can exit only on completion of 3yrs lock-in period?.


  3. Hi Hemant,

    Thanks for letting us know about the take over … I too have two Fidelity Funds .
    I don’t know what to do now. Whether L&T will take the same fund managers as well or they will change .. i think we need to wait and see OR we need to take out our money ?? Confusion

  4. Very timely article because most of Fidelity investors will be asking these questions.
    When Fidelity came to India they talked about their good research team and not much focus on Fund manager. SBI Contra fund and Sandeep Sabarwal were flavors of the season then. And from the returns and the Assets (8500 crore) they kept their promise.

    Let’s compare how some L&T funds have performed As on 28 Mar 2012

    L& T Equity :Net Assets in Crore are 30.81
    Fund Nifty
    Year to Date 12.20 11.63
    1-Month -3.03 -3.12
    3-Month 10.88 10.11
    1-Year -6.43 -7.56
    3-Year 23.06 19.05
    5-Year 4.73 6.57
    Return Since Launch 20.81

    L&T Opportunities: Net Assets (Cr) 98.21
    As on 28 Mar 2012
    Fund Category(Nifty)
    Year to Date 12.56 14.49
    1-Month -2.71 -2.37
    3-Month 11.91 13.85
    1-Year -9.79 -5.18
    3-Year 24.02 25.37
    5-Year 8.64 8.93
    Return Since Launch 15.77

    There performance is just ok.
    As per your recommendation

    If there is a major change in the attribute of the fund
    If the fund manager is changed
    If fund is not complying to its objectives as laid down

    These conditions are met so are you suggesting a sell in Fidelity?

    Liked the picture of run-out so ending with cricket analogy We are waiting for the third umpire decision!

    • Hi Kirti,
      These guys were in perfect position to make a 100 but then they fall short of the crease. I don’t know why they did it before trying some permutation combination – they were well ahead of most of the AMCs in ethics, standards & processes. 🙁
      Right now suggesting my clients to wait & watch but looking at present condition of L&T MF – odds are in favor of selling at the time of one month window. But I believe before that L&T MF will (should) come-up with a concrete plan – how they are going to make sure that unit holders will not be impacted.

  5. Hello Hemant,
    I am a long term investor who got into Fidelity from the time when the Equity scheme was launched! I am eager to know the when to exit and hence went over your article in detail. Towards the end of the article I found a seeming contradiction. On one hand there is mention that ” this entire merger may take few months or so subject to necessary approvals and due diligence”. Then there is the last line which states “Investors will be given a one month no exit load window by SEBI “.
    I would like to know when will this one month start and secondly how would we come to know of this period.
    Well, as regards the changes that one has to watch for, what would be a reasonable time which the new fund management will require to get their act together? Is one month going to be sufficient? That appears to be the implication of the SEBI window.
    And lastly, are the acquirers required to make known to the investors the changes they make in say the Fund Manager, Expense Ratio, changed objectives etc?
    Thanx and best regards,

    • “I would like to know when will this one month start and secondly how would we come to know of this period.”

      I have the same question as well.

      An article in MINT says “Once the capital markets regulator, Securities and Exchange Board of India, approves the deal—which should take about two-three months—L&T Investment will give an exit option to all existing investors of Fidelity (approximately a 30-day period).”

      So, we may have to keep watching this space on when the regulator approves.

      Hemant, if you know more, please help 🙂

  6. Investors should give the new fund manager several months before pulling the plug, if justified. For example, some funds in IDFC gave better returns after they took over from StanC. Some time things even go from good to better if the right talent is available. Just wait and watch – not necessarily exit in the window being provided.

  7. hello hement

    i am small investor only interested in tax saving instrument and i have invested Rs 10000/- last yr in tax saver of fidelity what are the options available to me and which is more profitable or less loss making .
    please suggest

  8. Hi Hemant,

    First of all, thank you very much for writing crystal clear and intuitive financial articles.I had been following your articles since last six months and found them very helpful.

    My query: I had invested last month in the Fidelity tax advantage ELSS fund which has a lock in period of 3 years. What can i do now??

    I had made this investment decision after comparing the best Tax saving ELSS funds on the basis of Alpha, Beta, Sharpe ratio and Expense ratio plus tax saving strategy of various advisers.

    I personally do not believe in L&T finance right now!

    These kind of situations force investors to believe that PPF is the best investment option. Because this situation may happen to any fund house.

    Please let us know your comments and strategy for these kind of situations.

  9. Exit option is welcomed. I want to get an answer as to why fidelity wanted to sell. Schemes were doing well. Management was good.did they disagree India growth story. Something cooked with fidelity and they decided to shut the amc business. I assume that they could not find profitable business opportunity in India due to our rules and regulations and were tired fighting with authority for change and finally lost hope. Let me recall they had mf distribution arm called funds net which they shut down after Jan 2009 when sensex was at 8500. I think this does augur well for mf industry. Best one leaving. Wake up regulators

  10. Dear Sir,

    I have started SIP in Fidelity Equity Growth Fund on 26/Apr/2011 for the period of 1 year.
    The terms of exit load condition is 1% if redeemed with in 1 year from the date of allotment or purchase applying First in First out basis.

    My question is as per the news report the Fidelity AMC is taken over by L&T AMC. I don’t wish to continue with L&T AMC. In this case When I exit; I am still liable to pay exit load? If Yes, why? When my original contract was with Fidelity and not with L&T.

    Request you to kindly reply on priority.

    Nikhil Uchat

    Nikhil Prakash Uchat

  11. Hi,

    I have invested in fidelity tax advantage this year, since it is a ELSS they have a lockin of 3 yrs, Do i have any exit option?

  12. Hello,

    Some one please tell me what is the right way to apply for SIP of any mutual fund .
    Do i have to go through some agent who will take his commission of some sort of 2% ? Do I have to pay any extra money in terms of service charge or anything besides the actual SIP amount ?

    Immediate help is required ,. Thanks

  13. Hi Austin,

    Why dont you use online platform like fundsindia which is such an ease to use and you can easily create sip in the funds you would want to. There is no commission of any sorts.


  14. Best way Austin is to invest straight from the fund house . It is one time job , get online access form filled and you can view your investments online and can do additional purchases and redemption too.

  15. daiwa , goldman such is also going to sell ….

    it had already published in news paper…

    sbi might be acuiring daiwa…

    its news paper news not mine personsnal opnioun…

    dont knw wht will with fidelity….

    bz l& t nt havnt created brand in mf segment….they r still far aways

  16. Wish to redeem all my MFs in Fidelity. But when I sent the redemption forms to L & T Mutual funds, the courier has come back.

    Please advise correct address of L & T MF

  17. i have invested 30000 in Fidelity tax advantage fund growth with nav 18.877. in year 4/12/2007. now i want to redeem my mutual fund . the current nav is 22.86. should i do it or wait for more.

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