Bharti AXA MFs do away with exit loads

Written by Markets Bureau | Mumbai | Updated: Sep 3 2010, 04:17am hrs
Probably in its quest to attract short-term money, Bharti AXA mutual funds have announced that there will be no exit loads in their three equity schemes. Few months ago, SBI Mutual Fund initiated a similar move for its SBI Bluechip fund. Usually, equity funds have a conditional exit load, and mutual funds charge anywhere from 1-2% of NAV for premature redemption of upto one year.

Sandeep Dasgupta, CEO, Bharti AXA Investment Managers said, This conscious decision of removing exit load has been taken to empower investors and differentiate our equity funds. According to the Bharti AXA Mutual fund, it will offers the investor the Power of Choice to invest at their convenience, albeit keeping in mind the long term growth prospective. However some players feels that, this is just an marketing gimmick to seek attention. After all, going is tough for the fund industry.

Recently market regulator, Securities and Exchange Board of India (Sebi) cracked down on differential load structure for multiple class of investors. It directed the fund industry to have uniform load structure for the lump sum as well as systematic investment plans (SIPs) route of investing.

From today, Bharti AXA equity fund, Bharti AXA Focused Infrastructure and Bharti AXA Tax Advantage would have no exit loads. Earlier these schemes had 1% of exit load, if redeem within a year of unit allotment.

Conditional exit loads are usually levied by fund houses in equity funds to help fund managers take a long-term call on its investments undeterred by redemption pressures. Also, providing for liquidity to meet redemption results in under-performance in a bull market as its funds wouldnt be fully invested into equities.

A CMO of the leading fund house on the condition of anonymity said, This can be a ploy to attract high net worth individuals into their schemes. But doubts do remain as to how the funds would manage redemption pressures for its equity fund while keeping their focus over the long haul.

Dhirendra Kumar, CEO of Value research said, "This is very interesting move as it will open up a new segment in the mutual fund industry. However the fund house has to ensure that they don't give upfront commission to distributors". After all, this could result in such distributors churning investments back and forth.