Liquid Mutual Funds New Exit Load Structure with effective from Oct 2019
The Securities and Exchange Board of India (SEBI) has finalized a graded exit load structure on Liquid Mutual Funds w.e.f from Oct 2019. The load structure will be reviewed annually by AMFI, in pre-consultation with SEBI. Let’s discuss the liquid mutual fund’s new exit load structure effective from Oct 2019.
As of October 2019, the exit load is not applicable to Liquid mutual fund redemption.
SEBI has also finalized the cut off timing in liquid funds 1.30 pm instead of 2 pm with effect from October 21, 2019. that means, If you invest before 1:30 pm in a liquid fund, you will be allotted units at the NAV of the previous day. Otherwise, the present-day NAV will be considered for your investment.
With this decision on Exit load, we may see some shift of Liquid fund assets under management to Overnight Funds.
The SEBI has also mandated that Liquid Funds should hold 20% of its corpus in Liquid Assets like Cash, Govt Securities & T-bills). This may lead to some drop in yields (returns) from Liquid Funds. However, the new investment norms may help in improving the liquidity profile in the liquid/overnight category.
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