Motilal Oswal Mutual Fund has announced an alteration in the exit load structure for its mid- and small-cap funds. Effective from March 18, the exit load for both Motilal Oswal Midcap Fund and Motilal Oswal Small Cap Fund will now stand at 1% for redemptions made within one year from the date of allotment, as opposed to the previous exit load of 1% for redemptions within 15 days.
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The decision comes in the wake of the stress test reports by the asset management company (AMC), revealing the liquidity profile of the funds.
| Name of the scheme | Existing exit Load | Revised exit load |
|---|---|---|
| Motilal Oswal Midcap Fund | 1% - If redeemed on or before 15 days from the date of allotment.Nil - If redeemed after 15 days from the date of allotment. | 1% - If redeemed on or before 1 year from the date of allotment.Nil - If redeemed after 1 year from the date of allotment. |
| Motilal Oswal Small Cap Fund | 1% - If redeemed on or before 15 days from the date of allotment.Nil - If redeemed after 15 days from the date of allotment. | 1% - If redeemed on or before 1 year from the date of allotment.Nil - If redeemed after 1 year from the date of allotment. |
According to the stress test findings, the Motilal Oswal Midcap Fund requires five days to liquidate 25% of its portfolio and 10 days to liquidate 50% of its portfolio.
Similarly, the Motilal Oswal Small Cap Fund needs two days to liquidate 25% of its portfolio and three days to liquidate 50% of its portfolio.
As of February 2024, Motilal Oswal Midcap Fund manages assets worth ₹8,490 crore, while Motilal Oswal Small Cap Fund manages assets totalling ₹1,491 crore.
This adjustment in the exit load structure is a proactive measure by Motilal Oswal Mutual Fund to manage potential liquidity challenges in the future.
By extending the period subject to exit load, the fund aims to discourage short-term redemptions and stabilise the fund's liquidity position.
Investor concerns
The alteration in exit load policy may raise concerns among investors regarding the impact on their investment strategies and returns.
With this, short-term investors may find the new policy less favourable, as it imposes a penalty for early redemptions within one year.
However, long-term investors may see this as a positive step towards enhancing fund stability and aligning with prudent investment practices.
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