Mumbai: Fund managers welcomed Securities Exchange Board of India decision on Thursday making listing mandatory for close ended schemes of mutual funds, and disallowing early exit from these schemes. SEBI’s decision comes at a time when the mutual fund industry is still hurting from the severe redemption pressure it faced in October, mainly in close ended fixed income schemes.
In October, the mutual fund industry recorded outflows of around Rs 97,000 crore.
Sale in the secondary market is an alternative for investors when an exit option is not provided by mutual funds, said Mr Ramkumar K, Head-Fixed Income, Sundaram BNP Paribas Mutual. It is also helpful to investors who may want liquidity before the maturity of close ended schemes, he said.
The new norm provides for a more efficient way of conducting a transaction, and will create liquidity based on demand and supply, said Mr Arindam Ghosh, Chief Executive Officer, Mirae Asset Global Investment Management.
While fund managers feel that SEBI’s decisions are beneficial for both investors and asset management companies, some analysts did raise questions on what could happen in case investors who early exit from these schemes do not find buyers in the secondary market.
If there is no buyer available then holding the units will be the same as holding illiquid stocks, said a fund manager.
While usually an investor does not choose to exit from a close ended maturity scheme, in an extreme situation such as in October this year, there might be investors who want an early exit, said Mr Badrish Kulhalli, Senior Fund Manager-Debt, Principal PNB Asset Management.
In a situation where the seller of the unit of the close ended schemes does not find a buyer, then he won’t be able to exit the scheme at a suitable price, said a fund manager.
