Several mutual funds are lining up new fund offerings (NFOs) this month with an aim to close subscriptions before July 31 , the deadline after which they cannot charge entry loads from investors.
Under Securities and Exchange Board of India (SEBI) regulations, from August 1, distributors will get no commissions from fund houses to sell mutual fund products, and will have to seek that directly from investors.
Two houses — Religare and DSP BlackRock Mutual Fund — have already announced the subscription periods (between July 10 and July 31) for their new schemes and others with SEBI approval are expected to follow.A third, Franklin Templeton, will have its issue spill over to August 8.
While the funds in question say the dates are only a coincidence, industry insiders say they are trying to make the most of the last one month to sell their funds through commission-hungry distributors before the new regulation kicks in.
“It is a mere coincidence as we applied for the scheme long back and it has got nothing to do with the no load rule getting applicable on August 1,” said S Naganath, President & CIO, DSP BlackRock Investment Managers.
But the head of marketing at a large fund house told Hindustan Times on condition of anonymity that there will be clear uncertainty for a couple of months after the no-load regime starts.
“Fund houses who have received regulator’s approval for their schemes have launched their schemes as it is the last month when the distributors can get the commissions and push the product,” he said.
Distributors currently receive a direct commission of 2.25 per cent from mutual fund houses for all equity fund investments.
“The industry will have to work out with the distributors as to how things work going forward,” said the chief executive officer of a mid-sized mutual fund.