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%.