SBI Mutual Fund AMC has indicated to its investors that it is reclassifying its mutual fund schemes based on direction from SEBI. SBI Mutual Fund is going to reclassify almost 38 mutual fund schemes by either renaming or changing its investment objectives etc., With this change in investment objective, there would be slight change in their mutual fund scheme performance in future. What is the reclassification changes done by SBI Mutual Fund AMC across these 38 mutual fund schemes? Which Mutual Funds are getting effected with such reclassification and categorization of mutual fund schemes? Should you continue to invest in them or exit? Do SBI Mutual Fund is giving an option to exit if investors do not like it?
Also Read: Best SIP Mutual Funds to invest in 2018-2019
What is reclassification and categorization of mutual fund schemes?
SEBI issued new norms / guidelines on mutual fund schemes few months back and all such schemes should be categorized into 5 baskets only.
5 Baskets are Equity, Debt, hybrid, solution oriented and other mutual fund schemes.
Mutual Fund Houses cannot launch similar schemes in same theme. Means, there would not be any duplicate plans which AMC can lauch or run.
Sebi has said the one-scheme-per-category rule will not be applicable to exchange-traded funds (ETFs) tracking different indices; fund-of-funds having different underlying schemes; and sectoral and thematic funds investing in different sectors.
Mutual Fund Houses (AMC) were asked to submit their proposal of their existing schemes along with categorization of the schemes. This took place in the last 4-5 months.
SEBI provided guidelines about the classification of largecap, midcap and small schemes. First 100 companies in market capitalization are termed as large cap, First 101 to 250 companies are termed as mid-cap companies and after 250+ market capitalization are termed as smallcap companies. Association of Mutual Funds of India (AMFI) would update this data twice on their website which would be basis where mutual fund schemes can invest based on their investment objectives. This would apply to all existing open ended mutual fund schemes which got SEBI clearance, however yet to be launched and for all schemes where draft documents submitted which are pending with SEBI for approval. You can read more about reaclassificatoin or categorization of mutual fund schemes here.
38 SBI Mutual Funds Schemes Reclassification – What does this mean?
SBI Mutual funds reclassification are done across all their schemes and here is the summary of changes.
1) Change in mutual fund scheme names
2) Change in fundamentals of the mutual fund scheme
3) Change in type of the MF scheme
4) Change in investment objectives of the scheme
5) Change in asset allocation
38 SBI Mutual Funds Schemes Reclassification – Should you continue or exit?
Now let us look at majority of the SBI Mutual Fund schemes which got changed and its impact.
1) SBI Bluechip Mutual Fund Scheme
Many of us have invested in this mutual fund scheme including me. While there is no change in mutual fund scheme name. There is change in investment objective and asset allocation
Existing Investment Objective: Open ended mutual fund growth scheme
Proposed investment objective: Open ended equity scheme investing in largecap stocks.
Existing asset allocation: 70% to 100% in equity and equity related instruments + 0% to 30% in debt and related debt instruments.
Proposed asset allocation: 80% to 100% in equity and equity related instruments + 0% to 20% in debt and related debt instruments.
Existing investment strategy: Minimum of 70% investment in equity and equity related instruments.
Proposed investment strategy: Minimum of 80% investment in equity and equity related instruments.
What do you conclude?
This mutual fund scheme was growth MF scheme which was investing across various blue chip stocks and other stocks irrespective of market capitalization with 70% portfolio in equity and 30% in debt. Now since its objective is to invest 80% in large cap stocks and 20% in debt, its span is reduced and constrained to largecap stocks only. Now this is purely largecap mutual fund only. If you want to invest in Largecap mutual fund, you can continue to invest in SBI Bluechip Fund. Otherwise you can exit.
2) SBI Magnum Equity Fund renamed to SBI Magnum Equity ESG Fund
SBI Magnum Equity fund which was equity scheme is now renamed to SBI Mangum Equity ESG Fund and would follow the investment in companies that are following ESG theme. It would invest 80% in equity and balance 20% in debt related instruments. ESG refers to Environment, Social and Government. Now this scheme is mored focused on ESG theme.
3) SBI Magnum Multiplier Fund renamed to SBI Large & Midcap Fund
This scheme has now become largecap and midcap fund means this is high risk mutual fund scheme. If you are moderate risk taker or want to invest only in large cap, you should stay away form this mutual fund scheme.
4) SBI Emerging Businesses Fund renamed to SBI Focused Equity Fund
This mutual fund has become a focused fund that will invest in maximum 30 stocks across various sectors. Means this is now a multicap or diverisified mutual fund scheme. Is this your objective, then continue to invest in this fund.
5) SBI Small & Midcap Fund renamed to SBI Small Cap Fund
If you have been investing in this theme, you might rethink now. This scheme earlier was midcap and smallcap fund. Now it is completely moved to small cap fund that will invest predominantly in small cap stocks. Smallcap fund is very high risk fund. If you already have small cap funds in your portfolio, you may exit from this fund.
6) SBI FMCG Fund renamed to SBI Consumption Opportunities Fund
If you are investing in this sector fund, you can continue to invest as it is only name change. This is thematic fund that will follow the consumption theme.
7) SBI IT Fund renamed to SBI Technology Opportunities Fund
If you are invest in this IT Fund, you can continue to invest as it is only name change.
8) SBI Pharma Fund renamed to SBI Healthcare Opportunities Fund
Again this is only name change, you can continue to invest.
9) SBI Magnum Balanced Fund renamed to SBI Equity Hybrid Fund
This is an aggressive balanced/hybrid fund that will invest predominantly in equity and equity-related instruments. You can continue to invest.
10) SBI Magnum InstaCash Fund Liquid floater plan will be renamed to SBI Overnight Fund
This debt MF scheme will invest in overnight securities. You can continue to invest.
11) SBI Premier Liquid Fund rename to SBI Liquid Fund.
No change in major fundamentals, you can continue to invest.
12) SBI Magnum Gilt Fund LTP – renamed to SBI Magnum Gilt Fund
This scheme will invest in government securities across maturity. No major change in the scheme.
13) SBI Magnum Gilt Fund STP renamed to SBI Magnum Constant Maturity Fund.
No major change in the scheme.
Also Read: Best Rural Theme Mutual Funds to invest now
14) SBI Magnum Monthly Income Plan renamed to SBI Debt Hybrid Fund.
This conservative hybrid fund will invest predominantly in debt instruments. Monthly income plan is removed from the name.
Complete list of 38 SBI Mutual Fund Schemes reclassification or categorization can be downloaded from this link.
What should you do if you don’t like the change in mutual fund scheme?
SBI Mutual Fund AMC is giving an option to investors:
1) If you don’t like these changes, investors are giving an option to exit the mutual fund or switch to another scheme from 16th April to 15th May, 2018 with zero exit load option. If you want to exit / switch after 15th May, necessary exit load applies.
2) If you want to continue with the mutual fund scheme, you don’t need to do anything. However you need to check the renamed MF schemes (wherever applicable) for your future tracking.
Conclusion: You can go thru SBI Mutual Fund Schemes you are investing, changes in its investment objective and categorization in largcap, midcap and small cap segment to understand whether there are any major changes in mutual fund schemes. Other related changes like portfolio mix, Change in MF scheme name etc., can be given secondary preference. If you think that a mutual fund scheme has undergone drastic change (diversified fund now become largecap fund) and you are not in agreement with that you can exit them before 15th May, 2018 and get benefit of zero exit load. Othewise, you can continue.
All the best SBI Mutual Fund Scheme Investors !!!
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SBI Mutual Funds Schemes Reclassification – Should you continue or exit
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Hi Suresh, what is the impact of the taxation in this regard, since this is SEBI Mandeded action will there be an tax excemption of LT/ST tax on reduemption?
Hi Dinesh, No tax exemptions. If you want to continue, you can continue, else exit them. There is no exit load, however if you sell them STCG / LTCG would still apply.
I have been investing in SBI FMCG Fund – Dividend through SIP.
Please advise if i should continue to invest or withdraw.
Thanks & Regards
Hi Jayaprakash, Since there is no change in investment objective, you can continue to stay in this fund