Reliance Mutual Fund has been renamed as Nippon India Mutual Fund. The new name came after Nippon Life Insurance of Japan completed the acquisition of 75 per cent stake in Reliance Nippon Life Asset Management from Reliance Capital. The management change has many existing investors in erstwhile Reliance Mutual Fund schemes worried. They are wondering whether they should continue with their investments?
“I have invested in different equity-based mutual funds of Reliance Mutual Fund. It is learnt that there is a massive change in the management of Reliance Mutual Fund. I am basically a long-term investor. What is the future of Reliance Mutual Fund? Should I exit from Reliance Mutual Fund and invest the amount somewhere else,” asked Debasish Dam, a reader of ETMutualFunds.com, on our official Facebook page.
We have been getting similar queries about some Reliance Mutual Fund schemes in the past.
That is why we decided to speak to some financial planners to find out whether they too are getting similar queries from their clients. We also wanted to know what advice they are offering to their clients.
Let us first address the issue of management change? Yes, the mutual fund has a new owner: Nippon Life Insurance of Japan. What does that mean for the investors in the fund house?
Nippon Life is Japan’s largest life insurance company and a global financial services conglomerate. It manages assets worth over $700 billion.
"Nippon Life is a 130-year-old financial services conglomerate. There is a certain kind of experience that they bring to the table. They have been managing the Indian funds with Reliance for all these years and they have some of the stalwarts of the industry still in the management. I see this as a positive structure," says Santosh Joseph, Founder, Germinate Wealth Solutions LLP.
Vishal Dhawan, Founder , Plan Ahead Wealth Advisors, also believes that the international track record of Nippon Life could result in better process. "This comes from the larger experience that international players like Nippon have in the area over Indian asset management firms," says Dhawan.
No change in fund management team
According to mutual fund advisors, investors should not worry about the future of their schemes if there is no change in the fund management.
“The schemes will continue to be under the same management team that has led the fund house for all these years. If there are any changes in the fund managers or in the fundamental attributes of the schemes, investors will be updated and given a way to exit the schemes. Right now, nothing of that is happening,” says Santosh Joseph.
Some investors are also worried about the record of foreign funds in India. Many global fund houses folded their shops in India after failing to capture the market in the country. Goldman Sachs, Fidelity, JP Morgan, Morgan Stanley, ING, Deutsche, Merrill Lynch, BlackRock… there is a long list of global fund houses that exited India after their unsuccessful attempt to make their presence felt in the mutual fund space.
Vishal Dhawan refuse to buy that line of reasoning. “I wouldn't extrapolate what had happened to some companies in India in the past to what might happen here. By far, we have a good track record of Nippon, we will have to see how it goes from here,” says Dhawan.
“There are examples of many global businesses not doing well in the Indian market, but there are also examples like Franklin Templeton Mutual Fund and Mirae Asset that have been successful,” adds Dhawan.
Then there are queries about the uninspiring performance of some Reliance schemes. For example, we have received several queries about Reliance Tax Saver Fund.
Mutual fund advisors believe that investors are trying to connect the recent change in ownership of the fund house with the patchy performance of some of the schemes.
“We can’t make a blanket statement about all Reliance funds. There are schemes that are underperforming. Make a peer comparison and a comparison with the index and see its performance in the long term. If you believe that the fund manager hasn’t delivered, you should opt out of the scheme,” says Santosh Joseph.
Vishal Dhawan asks investors to stay invested and give the schemes a chance. He says that if your scheme is underperforming, keep it on a watchlist and take a decision after six months or a year, depending on how long it has been down. “If your schemes are not underperforming its peers or benchmark, stay invested and watch the scheme for a year. If you see degradation in the returns or performance, take a call then. Right now, the best action is inaction,” says Vishal Dawan.
