Equity funds revise loads to deter early investor exit

By Aditya Kalra

NEW DELHI (Reuters) - Money managers in India are revising the load structure of their equity funds to discourage investors from early redemptions after a recent surge in equity markets boosted their unit values.

While some equity funds have introduced an exit charge, others which already had such a fee are extending the time period after which an exit doesn't draw charges.

"The fund house would like the investor to come into the equity funds for long-term," said Chintamani Dagade, senior research analyst at Morningstar India, adding that discouraging redemptions will help fund managers take longer-term bets.

The BSE Sensex has risen by more than three quarters since early March, boosted by foreign inflows and a revival in investor risk appetite.

As many as seven fund houses have revised their load structure since April, data from ICRA Online and official fund websites showed.

ICICI Prudential Asset Management revised the exit load pattern in over 10 of their equity oriented funds in June, including their latest offering -- ICICI Prudential Target Returns.

Investors in seven stock funds managed by DBS Cholamandalam would now have to pay an exit fee if they redeem their units within a year, instead of the earlier six-month period.

In India, most equity funds charge an entry-level fee of 2.25 percent on investments routed via a distributor and have a varied exit load structure.