In an effort to discourage redemptions from debt funds, six fund houses have increased their exit loads across eight schemes. Experts attributed this to the recent volatility in debt market. Also, fund officials said that they have hiked exit loads in order to match the maturity of portfolio in line with the one year investment horizon.
Value Research data shows that some fund houses have either hiked the exit loads or extended the application of exit load period. Birla Sun Life and LIC Nomura have increased their exit load by 50 basis points in their Birla Sun Life Short Term Opportunity Fund and LIC Nomura MF Bond while DWS and Principal have revised their loads by 25 basis points under their DWS Cash Opportunity Fund and Principal Bank CD Fund. ICICI Prudential and TATA MF have also extended the period of exit loads in their schemes.
Here is the list of schemes which have revised their exit load structures
|
Scheme Names |
Old Exit Load |
Period |
Revised Exit Load |
Revised Period |
|
BSL Short Term Fund |
0.25% |
90 |
0.25% |
365 |
|
BSL Short Term Opportunity Fund |
0.50% |
365 |
1.00% |
365 |
|
DWS Cash Opportunities Fund |
0.25% |
15 |
0.50% |
90 |
|
Principal Bank CD Fund |
0.25% |
90 |
0.50% |
180 |
|
ICICI Pru Short Term |
0.50% |
90 |
0.50% |
180 |
|
ICICI Pru Dynamic Bond |
0.50% |
180 |
0.50% |
270 |
|
Tata Floating Rate Fund - Long Term Plan |
0.25% |
7 |
0.25% |
30 |
|
LIC Nomura MF Bond |
0.50% |
180 |
1.00% |
365 |
Source: Value Research
In order to discourage investors from withdrawing early, some fund houses have revised their exit loads structure, says Nilesh Sathe, CEO, LIC Nomura MF.
A CEO of a fund house which has also increased the exit load in one of their schemes says “Many fund houses have increased their exit loads in short term funds so as to check volatility in the debt market after the recent turmoil in the debt segment.”
Nikhil Kothari of Etica Wealth Management also attributed this sharp revision in exit load structures to volatility in debt market. “Since the shockwave of July 15 in debt market when RBI had increased the Marginal Standing Facility (MSF) rate by 300 basis points, fund houses are putting all possible efforts to discourage redemptions from the debt segment as many of them have revised their exit load structure. Also, the AMCs don’t want short money to come in the debt portfolios.”
Hemant Rustagi of Wiseinvest Advisors says that fund managers have to match the maturity of investment in line with their investment horizon; hence, any early redemption pressure disturbs the portfolio.
“One of the key reasons behind this is that some fund managers are trying to keep the maturity of investments in line with the ideal investment horizon which is a good sign. Also, the exit load is like a signaling tool for the fund houses which indicates investors to stay invested at least for the given period to earn optimal returns,” says Vishal Dhawan of Plan Ahead Wealth Advisors.