Mutual Funds Alter Exit Load

Mumbai: Mutual funds are changing their exit load structure even as a heated debate over entry load rages within the mutual fund industry. A concept paper by Sebi, last week, proposed doing away with entry load if investors purchase mutual fund schemes directly from fund houses. Reliance Mutual Fund, Birla Sunlife Mutual Fund and Franklin Templeton Mutual Fund have increased the exit load in as many as six of their equity schemes. In the case of equity funds, exit load is a desirable load since it acts as a deterrent to investors from treating the fund as a short term investment vehicle which may be detrimental to long term investors.

While fund houses like Birla Sunlife have baegan charging an exit load of 0.5 per cent on investments in some of their equity schemes up to Rs 5 crore if redeemed within 6 months, others like ICICI Prudential have slashed the exit load on three of its schemes, two of which are equity diversified schemes. Since investors tend to use such schemes to play the market, which was at an all-time high level in July, the exit load was increased. Most fund houses have preferred to increase or decrease the load but others like JM Financial Mutual Fund have reduced the time frame on the exit load.

The fund house has now changed it to one month. Funds are also using the exit load to fight the competition in the market. The market has witnessed a flurry of arbitrage schemes in recent times including SBI Arbitrage opportunities fund, Lotus India Arbitrage Fund and others. While arbitrage funds as a product is tailored for volatile markets, the JM Arbitrage Advantage fund's corpus went up during the market downturn. But Mehta attributed it purely to the change in the lock-in period or the exit load. However, fund watchers feel that arbitrage funds are a different ballgame since these funds are favoured investment destinations for high networth individuals.

Source : www.indian-commodity.com