Mutual funds in India are marketed as long-term wealth creators. SIPs (Systematic Investment Plans) are promoted as the most disciplined way to build wealth over decades. Investors start SIPs in a scheme, expecting it to run seamlessly for 10, 15, or even 20 years.
But what most investors don’t realize is that SIP schemes don’t always survive unchanged. After mergers, reclassifications, or AMC consolidations, a scheme you invested in may disappear or morph into something else entirely.
This creates confusion: What happened to my SIP? Where did my money go? Is the merged scheme the same as the one I chose?
In this article, we’ll explore why SIP schemes vanish after mergers, the regulatory backdrop, the risks to investors, and how to protect yourself from nasty surprises.
Why Do SIP Schemes Vanish?
There are several reasons why schemes are merged or restructured by Asset Management Companies (AMCs).
1. SEBI Reclassification Rules (2018)
In 2018, SEBI mandated mutual fund houses to have only one scheme per category. Earlier, AMCs launched multiple funds with overlapping mandates (e.g., two large-cap funds). To comply, AMCs merged or rebranded dozens of schemes.
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Example: An AMC with two multi-cap funds had to merge them into one.
2. AMC Consolidations and Takeovers
When AMCs merge, the acquiring company often consolidates similar schemes.
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Example: HDFC MF absorbing schemes of other fund houses.
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Result: Your SIP automatically gets redirected to the surviving scheme.
3. Poor Performance and Low AUM
If a scheme has consistently underperformed or has a very low corpus, AMCs sometimes merge it into a stronger fund to maintain efficiency.
4. Thematic/ Sectoral Obsolescence
Sector/thematic funds launched during hype cycles (e.g., infrastructure, energy) sometimes lose investor interest. AMCs may shut or merge these into broader categories.
5. Strategic Branding
Fund houses occasionally rename or reposition schemes to align with market trends—even if technically it’s a merger of mandates.
How It Affects SIP Investors
When a scheme vanishes after a merger, here’s what happens:
1. SIP Auto-Redirected
Your ongoing SIP usually continues, but into the new/merged scheme. Example: If “Fund A” merged into “Fund B,” your SIP debits now buy units of Fund B.
2. Portfolio Characteristics Change
The risk-return profile can change significantly:
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A multi-cap fund merged into a large-cap fund reduces diversification.
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A mid-cap fund merged into a multi-cap fund dilutes the high-growth element you originally wanted.
3. Historical Returns Get Distorted
The merged scheme often carries the track record of one surviving fund. This makes it harder to assess how “your original” fund really did.
4. Confusion in Goal Planning
If you linked a specific SIP to a financial goal (e.g., retirement), a merger may make the fund unsuitable for that goal.
5. Possible Tax Implications (in some cases)
While most mergers are treated as tax-neutral transfers, certain restructuring can trigger capital gains taxation if investors choose to exit instead of accepting the merger.
Real-World Examples
Example 1: SEBI’s 2018 Reclassification
Nearly all AMCs restructured their schemes. For instance, ICICI Prudential and HDFC MF merged several of their overlapping funds. Investors who started SIPs in “Fund A” suddenly found their money going into “Fund B” with a different mandate.
Example 2: DSP BlackRock Merger
When DSP merged with BlackRock, multiple schemes were consolidated. Investors who had SIPs running in older BlackRock schemes woke up to new scheme names.
Example 3: Franklin Templeton Debt Fund Winding Up (2020)
Though not exactly a merger, the sudden winding up of six debt schemes highlighted how investors could lose access to their SIP vehicles without warning.
Why This Is a Problem
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Loss of Choice
You chose a fund for a reason (category, risk, strategy). After a merger, that choice may be lost. -
Dilution of Strategy
A focused mid-cap SIP may suddenly become a broad-based flexi-cap SIP, altering your portfolio balance. -
Investor Confusion
Most retail investors don’t track fund mergers. They may not realize their SIP has changed until much later. -
Emotional Disconnect
Investors feel cheated when a scheme “vanishes.” Trust in the AMC suffers. -
Goal Misalignment
A merger may leave your retirement SIP chasing a wrong risk profile.
AMC and Agent Behavior
Why don’t AMCs highlight this risk in SIP ads?
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Marketing Simplicity: Ads need to sell SIPs as “long-term safe.” Discussing scheme mergers complicates the story.
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Distributor Silence: Agents earn commissions regardless of scheme survival, so they rarely explain this upfront.
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AMC Incentives: AMCs want sticky assets. Mergers keep AUM intact, even if investor intent is compromised.
Regulatory Safeguards
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SEBI requires AMCs to inform investors before a merger, with an option to exit without load.
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Investors receive official communication letters/emails.
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However, most retail investors ignore or don’t understand these notices.
How to Protect Yourself
1. Prefer Established Schemes
Stick to schemes with large AUMs, long track records, and flagship status. They’re less likely to vanish.
2. Avoid Duplicate SIPs in Same AMC
Don’t fall for AMC marketing multiple similar funds. Stick to one well-managed scheme per category.
3. Monitor AMC Announcements
Watch for SEBI filings, AMC notifications, or fund house news. A merger notice is your chance to reassess.
4. Review Post-Merger Suitability
If the surviving scheme no longer matches your goal or risk appetite, consider switching.
5. Don’t Panic Exit Blindly
Evaluate carefully—sometimes the surviving scheme is stronger. Exiting may trigger taxes unnecessarily.
Investor Case Study
Ravi’s Story (Fictional Composite)
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Ravi started an SIP in a mid-cap growth fund in 2015.
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In 2018, the AMC merged it into a multi-cap fund due to SEBI rules.
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Ravi didn’t notice until 2020, when his “mid-cap SIP” was behaving like a large-cap SIP.
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His goal of aggressive wealth creation was compromised.
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Had he reviewed at the time of merger, he could have shifted to another mid-cap fund.
The Takeaway
SIPs are marketed as long-term, dependable wealth creators. But the fine print rarely mentions that schemes themselves can vanish, morph, or merge, often changing the very nature of your investment.
True long-term investing requires active awareness, not blind automation. Investors must:
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Track their SIP schemes.
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Reassess after every merger/reclassification.
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Ensure funds continue to align with goals.
The discipline of SIPs is not just in investing monthly, but in monitoring and adapting when schemes themselves change course.
Conclusion
The idea that “SIPs run automatically for decades” is a comforting story, but not the full truth. SIP schemes can and do vanish after mergers.
While SEBI safeguards investors with exit options, the onus remains on individuals to stay informed and proactive. SIPs are powerful—but only if the underlying scheme remains consistent with your goals.
Remember: you’re not married to a scheme, you’re married to your financial goals. If the scheme changes, don’t hesitate to reassess and realign.
