Mutual Funds

What Happens When an AMC or Fund House Closes?

By admin
09 July 2025
3 mins read

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What Happens When an AMC or Fund House Closes?

When you invest your hard-earned money in a mutual fund, you expect substantial growth over the long term. You believe your fund house will be up and running, at least till you reach your financial goals and sell your mutual fund units.

However, sometimes, fund houses can shut down unpredictably, which may cause panic among investors. You may have seen this in the case of recently closed mutual funds.

So, what happens after a fund house shuts down? More importantly, what happens to your money? Fortunately, the Securities Exchange Board of India (SEBI) has regulations to ensure that the investors' money remains safe.

In this article, we'll discuss four ways in which your AMC may cease operations and how these situations impact your money.

#1 Your fund house sells its business to an existing company

In this case, the acquiring company may take three actions.

Close the scheme: In this case, you'll receive a pay out from the fund house after the deduction of applicable expenses. Your pay-out will depend on the number of units you hold and the NAV of the fund on the final day of operation.

Continue the scheme: This will have little impact on you. There might be a change in the scheme's name and management.

Merges the scheme: In case of a merger, you can close mutual fund online without paying any exit load charges. After the merger, your old mutual fund and its units will no longer exist. If you choose to stay invested after the merger, you'll receive units of the merged fund, operated by the acquiring AMC.

Additional Read – What is the Difference Between AMCs and Mutual Funds?

#2 Your fund house sells its business to the JV partner

Some mutual funds in India operate under a joint venture (JV). When a JV partner buys a fund house, the management and the individual fund managers usually remain unchanged. Only the name of the scheme may change.

So, if you are an investor, you won't face any negative impacts after the sale.

#3 Your fund house sells its business to a new company

Suppose your AMC closes by selling its business to a new company that is yet to start its mutual fund operations.

In this case, the impact will be minimal because the acquiring fund house will continue operating the old funds under a different name and management.

#4 Your fund house merges two of its schemes into a single fund

In this scenario, the AMC will close one of the funds and add its securities to the surviving fund. Then, the merged fund will operate with the combined assets of both schemes.

After the AMC announces the date of the merger, you can exit from the fund without any exit load by submitting an online mutual fund close application. Or, you can switch to another scheme of the same AMC.

If you stay invested, you can exchange your existing fund units for units of the merged fund.

Additional Read – How to Invest in NFO?

In conclusion

If your AMC shuts down, don't worry. Mergers might boost the fund's performance, so stay invested and observe its growth. If you feel it is underperforming, you can always sell your units.

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FAQs

What happens to your money when a fund closes?

When a mutual fund scheme closes, because of a merger, a regulatory action, or an AMC decision, you don’t lose your money. The fund's assets are either transferred to another scheme or AMC, or redeemed and returned to you at the current Net Asset Value (NAV).

What does it mean if a mutual fund is closed?

A closed mutual fund means it is either a fixed-duration closed-end scheme or, in rare cases, a fund that is wound up before its time. Often, because the assets under management were low, the fund had compliance issues, or it was a strategic change.

What should investors do if their AMC shuts shop?

If your Asset Management Company (AMC) shuts down or exits the business, you will receive official communication via email, SMS, or postal notice. The AMC may offer a redemption of your units or transfer your account to a similar fund under a new AMC.

The AMC must let you know how you can exit before any forced transfers. You must track NAVs and payouts through CAMS or KFintech.

Your money is safe during the transition. The assets in the fund are held by an independent guardian and trustee, not the fund house directly.

If an AMC shuts down or is sold, what process follows under SEBI rules?

SEBI has defined a framework to handle fund house closures, mergers, or transfers:

The trustees of the mutual fund must agree and reveal the action to SEBI.
Investors must be given a 30-day notice with the choice to exit without an exit load.
If the AMC is sold, the new sponsor must satisfy SEBI’s fit and proper standards.
If the fund is closed, the assets are sold, and the proceeds are given back to the investors proportionally.

Are investors protected if the AMC goes bankrupt?

Yes, mutual fund investors are protected even if an AMC goes bankrupt. That’s because the fund house does not hold the money. The money is held by an independent trustee.

The guardian and executors are SEBI-registered. They supervise fund resources and ensure the investors are protected. Even if an AMC goes bankrupt, it cannot use investor money to pay its debts.

When an AMC goes bankrupt, SEBI appoints a new AMC or winds up the fund responsibly.