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Why Entry Load On MF Is Good For Investors?

Monday, May 07, 2012
By Anand Birai

It might be too early for distributors to rejoice over the speculations of entry load returning in the mutual fund business but it is surely a time for the investors to look forward for the development. Contrary to the popular view that the entry load ban was in favour of the investors, at least the industry body, Association of Mutual Funds in India (AMFI) is now openly speaking in favour of the entry load. The rumours around the street are that the regulatory body Securities & Exchange Board of India (SEBI) is also mulling the calling back its decision of entry load ban.

It is yet to assess that what kind of change it will bring to the mutual fund transactions if the entry load is imposed again but the investors need to be prepared for the same and rather greet the decision, if implemented. There are reasons why investors should invite the entry load and brace it.

Since, the entry load was banned in 2009, the industry has suffered and many distributors have already gone out of business. The investors, for whom, the mutual fund product serves the right tool to have exposure in the equity markets with small investment amounts, will have somebody to guide them. The regulators have already tested the waters of MF industry without distributors and failed to generate enough interest and investments in MF. Rather, the sales have been nose-diving since the entry load was banned. With zero entry load the investments have instead dropped drastically.

The existing network and infrastructure of the fund houses in India is not sufficient to cater the investors’ needs. With technological advancement, the servicing and tracking folios have become easier but lack of the human touch for introducing the products to new investors and guiding the existing investors in lieu of distributors has reduced the interest of investors in the product.

Hence, the entry load will mean better door-step services for the investors which include, tracking reports of the investments and their interpretation, up to date information on markets and their trends and hassle-free transactions.

On the other hand, the cost of entry load which was less than 2% was negligible for the investors in return of the services that the distributors provide. That is the reason why the investors should be glad if the entry load ban is rolled back and will be able to depend upon the expertise of the distributors. However, the only worry that the investors will face is of choosing the right advisor or distributor.

Deutsche revises exit load under DWS Premier Bond Fund  
Deutsche MF has announced to revise exit load structure under DWS Premier Bond Fund. Accordingly, an exit load of 1% will be charged if units are redeemed or switched out within 1 year from the data of allotment. The revised exit load structure will be effective from 9th May 2012.

Deutsche announces change in fund management responsibilities 
Deutsche MF has announced change in fund management responsibilities under DWS Insta Cash Plus Fund and DWS Treasury Fund - Cash Plan, with effect from 2nd May 2012. Accordingly, Rakesh Suri will be the Co-Fund Manager of DWS Insta Cash Plus and DWS Treasury Cash Plan in place of Nitish Gupta. Gupta will continue to be the fund manager for other debt/income schemes.

Principal announces change in asset allocation pattern 
Principal MF has announced change in asset allocation pattern of Principal Bank CD Fund, with effect from 1st June 2012. Accordingly, the scheme will invest up to 90% in Bank CDs with medium to high risk profile, up to 90% in repo, CBLO, units of money market/liquid funds with low to medium risk profile and 10%-20% in debt instruments with medium to high risk profile.

Kotak revises exit load under its scheme  
Kotak MF has announced to revise exit load structure under Kotak Equity Arbitrage Fund. Accordingly, an exit load of 0.50% will be charged if units are redeemed within 6 months from the data of allotment and nil if redeemed or switched out after 180 days from the date of allotment irrespective of the amount of investment. The revised exit load structure will be effective from 1st May 2012. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.


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