Fund houses revise exit loads on equity schemes to avoid quick sell-offs

Looking to discourage investors from quick sell-offs, fund houses have begun revising upwards their exit loads, or fees charged for sale of mutual fund schemes.

The move follows a strong rally in the stock markets, which has led to many retail investors cashing out from equity mutual fund schemes. The net outflow in September rose to a two-year high of Rs 3,559 crore from these funds.

As a result, a number of asset management companies, including ICICI Prudential MF, JP Morgan MF and Axis MF have started revamping their exit loads. Other fund houses are also likely to follow suit soon as it is necessary for them to encourage investors for staying put with their invested funds for a longer period of time, industry experts said.

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JPMorgan MF has announced a revision of exit loads for at least five schemes, including JPMorgan India Equity Fund.

Under the new structure, an exit load of three percent will be charged if units are redeemed or switched out within six months from the date of allotment, two percent if units are redeemed or switched out up to 12 months and one percent if units are redeemed or switched out up to 18 months.

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The revised exit load structure is effective from October 12. Beginning this month, ICICI Pru Mutual Fund has also re-jigged the exit load structure for its schemes including ICICI Prudential Equity and ICICI Prudential Discovery Fund.

It would charge an exit load of three percent if units are redeemed or switched out on or before six months from the date of allotment, two percent if units are redeemed or switched out on from 6-18 months.

No exit load will be levied if units are redeemed or switched out on or after 18 months. Axis Mutual Fund, which earlier charged one percent exit load for redemptions within one year, is now charging three percent for redemptions within before six months in certain schemes.

The exit load will be two percent if redeemed after 6-12 months and one percent if redeemed after 12-24 months. The load structure will be equally applicable to all special products offered under these schemes.

But, no load shall be levied on switches between plans and options of the scheme. Also, units allotted on reinvestment of dividends shall not be subject to load, the fund house said in a notification.

PTI