Many debt funds changed their exit load structure to deter investors from investing their short-term money in relatively long-term bond funds. At least 16 debt funds have hiked the exit load or increased the period of investment for a load waiver.
Here’s is a brief on the typical load structure of the open-end debt fund categories:
Liquid Funds invest in securities with a residual maturity of less than 91-days. Liquid funds don’t levy any exit load.
Ultra Short Term Funds hold a bonds portfolio of less than 1-year maturity. Most funds in this categories also don’t levy any exit load. Some charge an exit load of 10 to 25 basis points for redemption ranging between few days to a month.
Short Term Funds typically have a portfolio with maturity between 1 to 4.5 years. These funds charge a load of half to 1 per cent for redemption within 3-6 months.
Income Funds change their portfolio maturity to capitalise on their interest rate outlook. Hence, they lower the maturity when interest rates go up and hold bonds of longer maturity to gain from a falling interest rate. The load structure of income funds vary widely, but typically the exit load on income funds vary between half to 1 per cent for redemption with within 6-months to 1-year.