SomeClosed-EndFund­sGo­forTenureRollover

The Economic Times - - Money -

Mumbai: The on­go­ing bull run has prompted fund houses to re­set ma­tu­rity of their three-year closed-end eq­uity mu­tual fund schemes, which are com­ing up for ma­tu­rity now. Fund houses have rolled over the ten­ure of some of th­ese schemes ma­tur­ing in June and July to De­cem­ber 2020.

Birla SL Mu­tual fund has rolled over Birla SL Emerg­ing Lead­ers Fund - Se­ries 3 and Se­ries 4 by al­most two and half years to De­cem­ber 31, 2020. ICICI Pru­den­tial too has rolled over its ICICI Pru­den­tial Growth Fund - Se­ries 1 to De­cem­ber 2020.

“The pur­pose of re­set­ting is to ben­e­fit from the re­cent re­forms — im­ple­men­ta­tion of GST and fo­cus on in­fra- struc­ture de­vel­op­ment in the coun­try. In­creas­ing the ten­ure at this junc­ture would ben­e­fit in­vestors,” said A Bala­sub­ra­ma­nian, CEO, Birla Sun­life Mu­tual Fund.

“The pur­pose of the ex­ten­sion of ma­tu­rity date is to con­tinue to ben­e­fit from the im­prov­ing macro-eco­nomic data, and the ex­pected earn­ings growth for cor­po­rates in the next 2-3 years. Stay­ing in­vested in this scheme could help you gain from this op­por­tu­nity and pro­vide you the dual ben­e­fits of cap­i­tal ap­pre­ci­a­tion and reg­u­lar div­i­dend,” ICICI said in a note to unithold­ers. Once the scheme comes up for ma­tu­rity, in­vestors have two op­tions: they can fill up the req­ui­site rollover form and sub­mit it to the fund house which rolls it over till De­cem­ber 2020. But if they do not act, the pro­ceeds on ma­tu­rity will be re­deemed and money will be de­posited to their bank ac­counts.

Fund houses ar­gued that many in­vestors tend to de­lay rein­vest­ment in­vest­ment once money reaches their ac­count and if in the in­terim the mar­kets move up, they could miss out and hence opt­ing for a rollover could be to their ben­e­fit. Distrib­u­tors point out that fund houses stand to gain by a rollover as the money re­mains with the fund house and does not go back.

Many fi­nan­cial plan­ners be­lieve in­vestors are bet­ter off in­vest­ing in open-ended schemes, un­less there’s a spe­cific theme the fund man­ager wants to play which is not avail­able through open-ended funds.

“An in­vestor should exit a closedend fund and if he wants to re­main in­vested he can do so in an open-ended scheme. Every fund house’s top man­age­ment fo­cus is on their ope­nended scheme and the prob­a­bil­ity of those schemes per­form­ing bet­ter than closed-end ones is far higher,” said Manoj Nag­pal, CEO, Out­look Asia Cap­i­tal.

Over the past one year, Birla SL Emerg­ing Lead­ers - Se­ries 4 has re­turned 22.71%, marginally lower than its bench­mark S&P BSE Mid­cap’s re­turn of 24.9%. ICICI Pru­den­tial Growth Fund - Se­ries 1 has out­per­formed its bench­mark Nifty 50 over the past one year, ris­ing by 18.68% against the Nifty 50’s 16.51%.

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