IDFC MF has proposed to extend the maturity date of IDFC Equity Opportunity Fund Series 4, a closed-end multicap scheme that was launched on 29 December 2017.
While the scheme is set to mature on 4 January 2021, IDFC MF has proposed to extend the maturity date for 2 years i. e. till January 4, 2023. "It is proposed to rollover the scheme with the objective to provide the fund adequate runway to benefit from the expected recovery in GDP growth and capex cycle, and achieve the desired fund objectives," the fund house said in a notice to investors.
IDFC Equity Opportunity Fund Series 4 has delivered a compounded annual growth rate (CAGR) of -10.6% since launch (around -28% absolute return) as of 27 November, according to data from AMFI website. In comparison, its benchmark BSE 500 (Total Returns Index) has delivered a CAGR of 5.8% since the fund’s inception and almost 20% absolute return.
Now, unitholders of this scheme have the option to redeem their entire investment or rollover to continue their entire investment or redeem partial units and roll over the balance units in the scheme.
Roll-over will happen only in case of those unitholders who expressly provide their written consent to the AMC or CAMS investor service centres by December 15, 2020.
IDFC MF has said that the minimum corpus requirement to carry out the rollover of the scheme will be Rs. 20 crores. AUM of this scheme stands at around Rs 183 crore. In case the scheme fails to maintain this minimum corpus amount at the time of rollover, it will not be rolled over. All the units outstanding will be redeemed and proceeds will be paid to the investors.
Industry sources told Cafemutual that a few other big fund houses could follow suit, as their close-ended equity schemes are in the red while the benchmark has bounced back.
Some experts feel that it is better to avoid close-ended funds. MFD Srikanth Matrubai believes that investors should avoid closed-end funds unless they are pursuing unique and exciting themes. With these schemes neither can investors redeem at their will nor can they top up when they see opportunities.
Suresh Sadagopan of Ladder7 Financial Advisories said that investors should avoid closed-end funds unless they are completely unable to control their own behaviour with open-ended funds.
