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ITC-Threadneedle lifts 1 per cent exit load on High Interest fund
Aabhas Pandya
NEW DELHI, January 23: To attract short-term investors, ITC High Interest has done away with the 1 per cent exit load on investments of less than one year. The step is a clear shift from High Interest's earlier policy to attract only long-term investors, given the previous load structure.The removal of exit load is a fallout of the Reserve Bank of India's (RBI;s) measures to rein in excessive liquidity, which has led to astronomical call rates. ITC High Interest, the income fund from ITC-Threadneedle, has thus joined the bandwagon of no-load funds. The no-load structure came into effect from from Friday. "We want investors to benefit from call rates, which continue to rule high and even today, touched the 75 per cent mark. We have removed the exit load in order to attract investments from high net worth individuals and corporates and would deploy the same in the call-money market," an ITC-Threadneedle official said. The official said it was still not decided whether the move to remove the exit load was atemporary one. "As of now, we are not sure whether we would withdraw the current no-load status because it is linked to what RBI's next move would be," he said. During the recent turmoil in the debt market, the net asset value (NAV) of High Interest declined by 10 paise from Rs 11.38 on Friday to Rs 11.28 on Monday. The NAV has since recovered and stands at Rs 11.31. At present, about 45-50 per cent of High Interest's corpus of Rs 17 crore is deployed in the call-money market. "Being a small fund, even if we attract another 15 crore, the amount will go to the call-money market and enhance our exposure well past the 70 per cent mark," the source added. Although the new load structure is aimed at attracting short-term money, it will also benefit long-term investors since investments in the call market is expected to give a boost to the NAV. On the other hand, since a substantial exposure will now be in the call market, any major redemption request will be handled without liquidating any debt instruments.
"It is a proactive step from the fund management, aimed at attracting short-term money and without jeopardising the interest of the long-term investor," says an analyst. The move, however, signifies that the demarcation line between a money-market mutual fund (MMMF) and an income fund now stands eroded with the latter poaching in the former's territory. "The sole aim now is to attract huge funds and maximise returns," says a Mumbai-based fund manager. The move is also a fallout of the RBI's 30-day lock-in, applicable to MMMFs. Thus, either asset-management companies (AMCs) are now launching debt funds on the lines of Birla Cash Plus to veer around this stipulation, or existing income funds are beginning to function as short-term debt funds.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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