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What Happens to Exit Loads?

Exit loads are invested back in the fund itself. This benefits the other investors in the form of higher returns

What happens to the money collected as exit load while selling a fund? Does the expense ratio indicate the total amount of the fund's expenditure? Are there any other charges levied by the fund outside this?
- S. K. Singh

Exit loads are charged to dissuade investors from redeeming their investments too early. Earlier, fund managers used to utilize the exit load collected towards meeting their expenses but now, mutual funds are supposed to plough back the exit loads collected into the scheme itself. This benefits the investors in the form of higher returns.

Yes, expense ratio is the total of all expenses that a fund incurs for management, operation and administration of the fund house. It includes Investment Management & Advisory Fee, Trustee Fees, Audit Fees, Custodian Fees, Registrar & Transfer Agent, Marketing & Selling Expenses including Agents Commission, Cost related to Investor Communications, Cost of Fund Transfer from Location to Location, Cost of Providing Account Statements and Dividend Redemption Cheques and Warrants, Cost of Statutory Advertisements, Cost towards Investor Education & Awareness, Brokerage & Transaction Cost, Service Taxes, Other Expenses such as Listing Expenses. The expense ratio for which SEBI has specified certain limits, covers all the costs of the fund. Recently SEBI has allowed funds to charge an additional 0.30 per cent in its expense ratio if it has a specified portion of money coming in from the smaller cities, outside the top 15.

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