MFs increase exit load
Despite No Entry Fee, Investors Have To Pay More While Making Redemptions M Allirajan | TNN Coimbatore: It may be exit for entry load for mutual fund (MF) investors from August. But they have to cough up more when they actually make an exit from MFs now and have to remain invested longer to completely avoid exit load. Fund houses have increased exit load and the minimum time period required to stay invested before making redemptions, without paying any charges on equity schemes. While funds were charging 0.5% for exits made after six months but before a year, on equity schemes, they have now hiked it to 1%. MFs were not charging any exit load on redemptions made after a year but now an investor has to keep his money locked in a fund for a minimum of two years to avoid the 1% exit load. Many fund houses have even hiked the minimum time limit to three years. All these loads are applicable for the retail category (investments below Rs 5 crore). However, exit loads for debt schemes continue to remain low. "Exit load up to 1% of the investment value charged to the unit holder by the fund on redemption shall be retained in a separate account and will be utilised for payment of commissions and to meet other marketing and selling expenses," Kotak Mahindra MF said in its filing to Sebi. "We would be able to get long term investments. We want investors to stay on and get optimal returns," says R S Srinivas Jain, chief marketing officer, SBI MF. "The exit load (increase) is not to make money but to drive (proper) investor behaviour in the long run," affirms Jaideep Bhattacharya, chief marketing officer, UTI MF. SBI and UTI now charge 1% exit load for redemptions made in equity schemes within three years. Reliance MF, Principal MF, Birla Sun Life MF and ICICI Prudential MF are among those who have similar charges. "Expenses for marketing and brokerage commission would also be (made) from exit load," says a financial advisor. Further, the investor may have to pay a separate commission upfront for his financial advisor. "The upfront commission on investment would be paid directly by the investor." Fund houses have to now settle for a lower management fee as they have to increase the brokerage for distributors, who wouldn't be getting charges upfront automatically due to the ban on entry load. The management fee has been capped at 1.25% and fund houses such as SBI charge 0.65-0.75% now. With brokerage rates expected to go up from 0.5% to 0.8-0.9%, fund houses would have to slash management fee by at least 0.3%. The overall costs for a fund house works out to 2.25% with charges being given to the distributor, custodian and registrar besides management and trusteeship fee. With the new regime kicking in, industry officials say that the focus would be on reducing operational costs and improving quality of service. * LONG-TERM GAME * Fund houses have increased the minimum time period required to stay invested before making redemptions, to completely avoid paying exit load While funds were charging 0.5% for exits made after six months but before a year, on equity schemes, they have now hiked it to 1% MFs were not charging any exit load on redemptions made after a year but now an investor has to keep his money locked in a fund for a minimum of two years to avoid the 1% exit load --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
