Many AMCs are modifying their existing products to make them RGESS compliant while some are filing for new schemes.
After SEBI announced norms for RGESS early this month, AMCs are making preparations to launch Rajiv Gandhi Equity Savings Scheme (RGESS) either by altering their existing schemes or filing offer documents for new schemes which would comply with Ministry of Finance norms for RGESS.
AMCs that already have ETFs are planning to convert their schemes into RGESS while others are launching new schemes. “We will have to launch new schemes because converting existing close-ended schemes into open-ended is not easy,” said a top official from a large AMC.
DSP BlackRock Mutual Fund has filed an offer document with SEBI for launching an RGESS (DSP BlackRock RGESS – Series 1 to 5 which is benchmarked against BSE 100. AMCs can launch multiple RGESS scheme. As per its offer document, this scheme would charge the same expense ratio which is applicable to equity funds - 2.50% on the first Rs 100 crore, 2.25% on the next Rs 300 crore and so on.
From December 11, four of Goldman Sachs ETFs have been converted to RGESS- Goldman Sachs Nifty Exchange Traded Scheme, Goldman Sachs Nifty Junior Exchange Traded Scheme, Goldman Sachs Banking Index Exchange Traded Scheme, and Goldman Sachs S&P CNX Nifty Shariah Index Exchange Traded Scheme.
Reliance has also filed for an ETF called R*Shares CNX 100 ETF which it plans to convert into RGESS while Quantum Mutual Fund is tweaking its Quantum Index Fund ETF into RGESS. Peerless Mutual Fund is also in the process of filing an offer document for launching an ETF based RGESS. Fund officials expect to get approval for these schemes swiftly.
A major challenge will be to identify and reach investors eligible for RGESS. “The task would largely rely on depositories to find out new investors entering the market. They can be identified base on their PAN details. It would remain a non-starter at least for this year,” said a CEO of a private sector AMC.
Officials are not too optimistic of receiving a huge response from investors. “People won’t flock to RGESS for saving Rs 5000. It won’t be a game changer but it is something for the industry to talk about. Our understanding is that existing debt fund investors who have not invested in an equity fund could be eligible to invest in RGESS,” said a CEO of a mid-sized AMC.
AMCs planning to launch new schemes have to wait till they get SEBI’s permission while those planning to convert their existing schemes/ETFs can launch RGESS quickly by issuing addendums, which does not require the regulator’s go ahead.
