SEBI had recently announced a 7day graded exit load period for all liquid funds, given the credit issues. Here’s how much of an exit load will be applied and the impact on returns.
Exit Day
NAV before exit load
exit load
NAV after exit load
Return after exit load (% p.a.)
Impact on Returns (% p.a.)
Day 1
100.0151
0.0070%
100.0081
2.90%
-2.56%
Day 2
100.0301
0.0065%
100.0236
4.30%
-1.19%
Day 3
100.0452
0.0060%
100.0392
4.80%
-0.73%
Day 4
100.0603
0.0055%
100.0548
5.00%
-0.50%
Day 5
100.0753
0.0050%
100.0703
5.10%
-0.37%
Day 6
100.0904
0.0045%
100.0859
5.20%
-0.28%
Day 7
100.0151
Nil
100.0151
5.50%
Nil
Note:Assuming an NAV of Rs. 100 and a scheme return of 5.5% p.a. , the following would be the impact on liquid fund returns for investors redeeming their funds before 7 days:
Source: ICICI Mutual Fund
What are the other alternatives to liquid funds without any exit load?
You can invest in an Overnight Fund. These funds can only invest in securities with maturities of 1 day. This means that there is practically no interest rate risk. Overnight funds predominantly invest only in an instrument called Triparty Repo (TREPS) through CCIL which acts as a counterparty to all trades. Which means there is no default risk.
Very Informative, Thanks!
But explain what happens to exit load. Will that be pocketed by the mf or just added to the fund’s asset size/value.
if yes, investor holding more than 7 day will be benefited by this.