In the recent financial turmoil in US, the names affected include Lehman Brothers, Merrill Lynch and AIG. While Lehman does not have a direct consumer portfolio since it does not have any asset management or insurance company though has taken equity stakes in various domestic companies or SPV or real estate projects.
Merrill Lynch runs mutual fund operations through DSP Merriil Lynch and after selling itself to Bank of America, concerns are being raised over its future. Many investors would know that name of DSP ML was already slated to change to DSP BlackRock since the mutual fund business was moved to BlackRock Investments and it might be a coincidence that the name change takes place after BoA takeover. Thus Merrill Lynch practically does not have any connection with DSPML.
Even in a worst case scenario, if Merrill Lynch was would up nothing would have happened, since the money belonged to unit holders and not to the AMC which is just acting as a custodian of the money and earning fees for managing investments.
Similarly with AIG, it has a partnership with Tata for its insurance business in which the latter holds 74% stake, which in itself is a big comforting factor for Indian investors. As such liquidity and solvency won’t remain a problem.
As regards AIG Mutual Fund, which is a wholly owned subsidiary, money might be safe but there may be a change of ownership since after bailing out AIG, American Government might restructure its business and divisions in different countries.
However, normal investor tendency is to stay away from investments which have a slight degree of risk and doubt especially when there are other investment options available, so it won’t be surpsring, if these business witness some redemptions and fall in business.