No charges for redeeming MFs before fund house shuts

Investors can redeem investments by submitting transaction slip; but taxes will charged, if applicable

Twenty-six thousand investors of Sahara Mutual Fund would be worried about their investments. In an order dated July 28, the Securities and Exchange Board of India (Sebi) cancelled the asset management company’s registration and asked the fund house to transfer its operations to another fund house within six months.

The Sahara Mutual Fund website displays a link to the Sebi order. Thankfully, a running scroll on the website displays the latest net asset values (NAVs) of its schemes.

When Business Standard called the Mumbai office of Sahara MF (the numbers are mentioned on the website), the employee who answered, explained that investors have to download the transaction slip, take a printout, fill it and submit it either in person or by courier at any of the fund house's offices. The form can also be submitted at any of Karvy's offices. If investors' KYC and bank account details are updated, the money will be transferred through National Electronic Fund Transfer, or else by cheque.

“If your filled and signed transaction slip reaches us before 3 pm, you will get the NAV of that day, or else the next day. If your bank account details are updated, you will get the money within three days. Otherwise, it might take up to 10 days for the cheques to reach you,” he explained. As on June 30, Sahara MF has assets of Rs 134 crore. It has 10 equity-oriented schemes and six debt-oriented schemes.



In case of merger or shutting down, the asset management company (AMC) places advertisements in newspapers and gives a timeline within which investors can redeem their investments without charges. If you want to redeem your investments, you have to inform the AMC through a common transaction slip, and the proceeds shall be credited to your nominated bank account. Before merging, the existing fund house will also give a public notice, or press release, informing the merger of schemes. The press release will mention the scheme with which the existing scheme would merge.

As MFs work as trusts, the fund corpus with the trust gets transferred to? a different asset manager, either retaining the identity and structure or through merging of the schemes. Investors are given an exit window without any load or penalty for a specified time. “An MF that is shutting down is bound by regulation to offer an exit window to all existing unit holders within a specified time. No exit penalties are levied during this time. However, tax incidences are subject to applicable tax laws prevailing at the time of transaction,” says Surajit Misra, EVP & National Head - Mutual Fund, Bajaj Capital.

“If the new scheme is well rated, a consistent good performer and managed by a good fund manager, you should continue with the fund or else, you may exit the fund by redeeming your units without any charges. One should also check if the investment objective of the fund matches your goals or investment needs. Also compare fund expenses as indicated by expense ratio, especially in case of debt funds, where lower expenses play a huge role in overall yield of the debt fund in the long term,” says Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

If you decide to shift, select a scheme depending on your requirement rather than choosing a fund house. But some broad parameters for selecting a fund house are one that has good fund management team. This can be judged by the number of funds that carry 5-star or 4-star ratings. The AUM size of the fund house and tenures of fund managers with the AMC are also important criteria. 

"The longer the fund manager sticks to a fund and a fund-house, the better it is, Dhakan adds.

"Choose an AMC by considering pedigree, consistency of performance, commitment to business and commitment to scheme objectives, out performance to the benchmark and against peers and analysis of underlying portfolio. If a bad fund house is merging with a good fund house, it's always good to continue. However in case of opposite, one should exit and explore other options,'' Mishra adds.