What Is a Mutual Fund Merger and How Does It Affect You?

Have you ever received a message from your AMC saying your mutual fund is being merged with another? If it left you confused or slightly anxious — you're not alone.

A mutual fund merger might sound like a big deal, but it’s more common (and less dramatic) than it seems. Still, it’s essential for you as an investor to know what this means for your money.

Let’s simplify this together.

Key Takeaways

• Mutual fund mergers usually happen for regulatory or performance reasons — not emergencies.
• Your investment value stays intact, but the number of units and fund strategy may change.
• You don’t have to panic, but you should review your new fund and goals after the merger.

Why Do Mutual Funds Merge?

Mergers are usually initiated by the AMC — not because your fund is failing, but to improve efficiency or meet SEBI rules.

Here’s why funds are merged:

• Underperformance: If a fund isn’t doing well or has very low Assets Under Management (AUM), it might be merged into a stronger one.
• SEBI Regulations: As per SEBI’s mutual fund categorization rules (in effect as of 2025), AMCs are expected to reduce overlap and simplify offerings.
• Business Strategy: Sometimes, two funds with similar objectives are combined to streamline operations

Example : If you had invested in a short-duration debt fund that got merged into a dynamic bond fund, it's likely due to overlapping categories.

What Happens to Your Investment?

You don’t lose your money — but here’s what changes (and what stays the same).

➤What about your NAV?

The Net Asset Value (NAV) of your units adjusts based on the scheme you're being merged into.

Let’s say:

• You hold 1,000 units at ₹20 (₹20,000 value).
• The target fund’s NAV is ₹40.

Post-merger, you’ll get 500 units at ₹40 — same value, different unit count.

➤ Do your returns change?

Potentially, yes. If the new fund follows a different strategy or has a new benchmark, your returns could shift over time. For example, if your conservative debt fund is merged into a slightly riskier fund, your volatility might increase.

➤ Do you need to act?

If the new fund matches your financial goals and risk tolerance — you're good. But if not, you can exit the scheme before the merger date without paying an exit load.

Tip: Always read the merger notice carefully. It usually lists your options clearly.

What Should You Do Next?

As an investor, it’s important to stay proactive — not passive.

 

Read the Fine Print

Every AMC must notify you in advance about the merger. Check:

• The reason behind the merger
• Whether the fund’s objective or strategy is changing
• If your SIP will continue (it usually does)

 Revisit Your Financial Goals

Does the new fund still serve your purpose — say, saving for a house or building an emergency fund? If the new risk level or strategy feels off, it may be time to reallocate.

Know That You Have Options

If you’re unsure, you can:

• Continue with the merged scheme
• Redeem your units before the merger (without exit load)
• Talk to a financial advisor

 Conclusion

A mutual fund merger might feel like your investment is being shuffled around — but really, it's just part of how the mutual fund industry evolves. As long as you stay informed and regularly check your portfolio’s alignment with your goals, you’re in control.

And if liquidity is your concern, remember: you don’t have to redeem your investments.

Quicklend lets you borrow against your mutual funds without disturbing your financial growth.

 

This is general guidance. For personalized loan advice, contact our advisors.