scorecardresearchHow can you track key changes made to a mutual fund scheme? Details here

How can you track key changes made to a mutual fund scheme? Details here

Updated: 24 Sep 2022, 09:48 AM IST

Making investment in a mutual fund scheme is not enough as investors are supposed to keep track of the key changes made to the scheme. It is vital to keep a tab on these changes.

When fundamental attributes are changed, investors are given a 30-day period to decide whether they wish to exit the MF scheme

When fundamental attributes are changed, investors are given a 30-day period to decide whether they wish to exit the MF scheme

Buying mutual fund units is not enough. It is indispensable, at the same time, to keep a regular tab on the changes, whatsoever, in the fund scheme made by the fund house. One might wonder as to what kind of changes occur in the scheme from time to time.

In fact, every fund scheme has three key elements: type of scheme —open-ended or close-ended & the category, investment objective: growth or income, and third, terms of issuance. As per the market regulator SEBI, any changes introduced by the fund house to one of these elements are seen as a change of key attributes.

Sample this. After rolling out the flexi-cap mutual fund category, some mutual fund houses re-categorised their multi-cap schemes to flexi-cap ones to ensure flexibility in terms of large-cap, mid-cap and small-cap allocation.

After some key attributes are altered, investors are given a 30-day period during which they can decide if they wish to exit the MF scheme without any exit load.

Intimation to investors

When such major changes take place, fund houses tend to send a notice giving out proposed changes. Advertisements are also issued in an English daily with nationwide circulation, along with a similar advert in a local newspaper where the fund house’s head office is located.

The fund house may send email intimation too to its investors. Once the 30-day time-frame given to existing investors comes to an end, the scheme information document is immediately updated, and can be found on the official website of the mutual fund house.

Adding an addendum

There could also be situation when the changes made to the mutual fund scheme are not too significant; in that case an addendum is attached to SID (scheme information document) and KIM (key information memorandum). One can find the addenda separately on the website of AMC.

For example, Aditya Birla Sun Life mutual fund on Sept 9 released an addendum to announce that risk-o-meter of its fixed term plan (series TT- 153) has been changed from low interest rate risk to moderate credit risk. Likewise, Mirae Asset Mutual Fund released an addendum on Sept 6 on the appointment of Taewan Kwon as chief financial officer. 

However, the fund house is supposed to give out advertisement in newspapers as in case of fundamental attributes. These changes could relate to that of benchmark index or a change in load structure.

At the same time, when statutory changes take place at the fund-house level, they are updated in statement of additional information (SAI).

Investors can find addendum to the changes in key personnel at the AMC level, attached to SAI. Since this document entails statutory level information, investors do not need to look at it before taking an investment decision.

What should an investor do?

It is recommended that an investor takes a look at KIM, since it is the brief version of SID. However, investors should not act impulsively after being notified of the changes. For example, when fundamental attributes of a scheme are altered, the investor might decide to sell the mutual fund units assuming that it won’t draw exit load, but not realising that this could get capital gains tax.

So, it is not recommended to act upon these changes unless your investment in the mutual fund scheme renders irrelevant to your financial goals.

MF Central is one platform to deal with all mutual fund related worries.
First Published: 24 Sep 2022, 09:48 AM IST