I, Atul Shah (ARN-0225) , hereby present my views for selling high load schemes. More discussion from all concerned entities shall help MF Industry...
My views:- High load equity open ended schemes are injurious--- IFA/ sales persons shall delete such schemes from list of recommendations... because..
1) All equity schemes have equal probability to be in 1st quartile and this segment has more than 200 schemes floated by some 40 AMC(S) VIZ- LARGE CAP/ MID CAP/ FLEXI CAP /AGRESSIVE / VALUE BASED ETC- ETC. --- Thus chances of some 5-10 high load schemes to fall in 1st quartile in next 3/6/9 months is less than 10%... In to-day's equity scenerio, subscriptions in equity segment is negative to neutral and new funds may come from some experienced/ educated / technology users and they are definitely evaluating scheme performances.. Why shall a person sell scheme with high loads as suggestion of entering high load schemes have 90% plus chances of not being in 1 to 5.. The investor shall suffer extra 3% absolute loss if he wants to switch.. A salesman , recommending high load schemes is bound to loose investor..
2) High load schemes restrict investors who are also investing in stock markets.. 3% cost is a great barrier for them as they do consider (liquidity) some switching/profit booking..
3) High load schemes shall be punished /neglected by investors preferring ETF(S).. Doors are closed for ever-- No re-thinking..
4) IFA shall have to face unnecessary conflict after some 3-6 months and onwards because general practice is 1% exit load upto one year..While evaluating in 2013 onwards we &/or investors may not remember high loads of oct 2012 (entry period). and dissatisfaction due to loads may cause loss of investor.. Thus, it is better to avoid/neglect high load schemes and special featured schemes...
SEBI & MF industry, both are trying to simplify MF investments and introducing common terms.. & common practices... Why some AMC(S) are adding some conflicts/ complications?
AMC may say that high loads are for benefits of long term investors.. BUT they are afraid of CLOSE ENDED EQUITY SCHEMES.. Why are they not daring to come with close ended NFO for their intended /notionally thought benefits of long term investors?
To day is not a period of teji & euphoria like situation is not at all predicted even in medium term.. Thus any step resulting in restriction of entry in EQUITY MF shall be avoided. Past experience of close ended equity schemes have taught us a lessons ..
Even CEO/CIO of MF AMC(S) HAVE confirmed in public that good performance comes only when fund managers are constantly reviewed and kept on toe to beat benchmark...