Can you please let me understand as to how a direct plan of a scheme can have a lower NAV when compared to a regular plan of the same scheme? What’s more, the returns on the direct plan are also lower. See the below instance of DSP BR MIP fund.
-Hemal Tanna
Direct plans were introduced in funds from January 1, 2013. Fresh investments in direct plans or investments switched into the direct schemes were allotted units at the prevailing NAV of corresponding regular plan of the scheme. Thereafter, all the transactions, were applied NAVs of respective direct plan.
According to the AMC, the NAV of direct plans is lower than the regular plans because of an accounting error. The spokesperson for the AMC said, “During the initial period, the corpus of the direct plan was relatively very low, in comparison to the unit activity in the plan. On occasions, there were reversal or missed transaction processing, due to various reasons, primarily Cheque dishonors. This resulted in accounting of such reversals or missed, at prices different from prevalent NAV and accordingly resulted in lower or higher (in addition to difference in expenses) NAV of direct plan in comparison to regular aplan.”
This article was originally published on June 05, 2013.
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