The move by the market watchdog Securities and Exchange Board of India (Sebi) for removal of charging and amortisation of initial issue expense in closed-ended mutual fund (MF) schemes has prompted fund houses to rush with their new fund offers (NFOs) under closed-ended category before the proposal comes in to force. Out of the 11 equity-linked NFOs, floated by major fund houses that is currently opened for subscription, 9 NFOs, are closed-ended funds.
A fund manager with a leading fund house who did not wish to be named said, ?The sudden big rush in the closed-ended schemes is because of the approval given by Sebi to the proposal of waiving initial issue expense. Those fund houses which have already got Sebi nod to launch their closed-ended schemes are thus rushing to the market so that they can now charge investors the initial issue expenses before the proposal comes in to force.?
Sebi at its January 30 board meeting had given approval for this proposal which states that henceforth all mutual funds schemes shall meet the sales, marketing and other such expenses connected with sales and distribution of schemes from the entry load.
Another fund manager with a domestic fund house said, ?The launch of closed-ended fund is also because of the high level of uncertainty prevailing in the domestic equity market. Seeing the high bout of volatility, even fund managers are not willing to take a short-term call on the market and hence going for the closed-ended schemes, where churning is very less.?
Some of the NFOs under these schemes are UTI Long term Advantage Fund, Standard Chartered Small and Mid Cap equity fund, Reliance Equity Linked Savings Fund, Lotus India Small and Mid-cap fund, ICICI Prudential Fusion Fund Series and JM Core 11 Fund Series.