Need Expert Advice?Our Gurus Can Help

Financial Planner - Answered on Apr 20, 2024

Vivek Shah is a SEBI registered investment advisor and certified financial planner from FPSB India. He has over 18 years of experience in financial planning.
Shah founded Finrise, a financial planning and wealth management firm, in 2011. He believes that equity investment is the only way to generate long term wealth.
He has an MBA in finance, a degree in chartered accountancy and is a registered life planner from Kinder Institute of Life Planning, USA.... more

Asked by Anonymous - Apr 12, 2024Hindi

if Mutual fund AUM company bankrupt then what happens to investments in various schemes??

Ans: When a mutual fund company shutdown or get sold to other company, it can indeed be concerning for investors, but there are regulations and procedures in place to protect investors' interests, at least to some extent. Let me try to explain the same in best of my knowledge:

Segregation of Assets: Mutual funds are set up as trusts, and they have a clear separation between the assets of the mutual fund and the assets of the asset management company (AMC) managing the fund. This means that even if the AMC goes bankrupt or shuts down operation, the assets of the mutual fund are typically kept separate and should not be affected.

Appointment of a New Fund Manager or AMC: In the event of a mutual fund company going bankrupt or shutdown operations, the regulator, Securities and Exchange Board of India (SEBI), usually steps in to ensure that investors' interests are protected. SEBI may appoint a new fund manager or a different AMC to take over the management of the affected mutual funds. This ensures continuity in managing the investments and reduces disruptions for investors.

Liquidation or Transfer of Assets: If a mutual fund company is unable to continue operating, SEBI may initiate the process of liquidating the assets of the affected mutual funds. The proceeds from the liquidation are then distributed to the investors.
Alternatively, SEBI may facilitate the transfer of the management of the mutual funds to another AMC. This transfer ensures that investors' investments are still managed, and they have the option to continue with the new fund manager or redeem their investments.

Investor Communication: Throughout this process, SEBI and the new fund manager or AMC appointed will communicate with investors to keep them informed about the situation and any steps they need to take. This communication is crucial for maintaining trust and transparency in the investment process.

Investor Rights: Investors have certain rights protected by SEBI regulations. They can choose to redeem their investments if they are not comfortable with the new management or if they believe it's in their best interest to exit the fund. However, it's important to note that redeeming investments in such situations may come with certain costs or tax implications, depending on the specific circumstances and the terms of the mutual fund schemes.

It's essential for investors to stay informed about the financial health and regulatory compliance of the mutual funds they invest in. Diversifying investments across different mutual funds and asset classes can also help mitigate risks associated with the bankruptcy of a mutual fund company. Additionally, consulting with a financial advisor can provide personalized guidance based on individual investment goals and risk tolerance.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

Name of the Fund	Category	RankMF Star Rating
Aditya Birla Sun Life Pure Value Fund – Gr	Equity - Value Fund	2
Aditya Birla Sun Life Resurgent India Fund-Series 6-Gr	Close ended Scheme	We don’t rate close ended schemes
L & T India Value Fund –Gr	Equity - Value Fund	3