Two reputed mutual fund houses (Axis & Tata) declared dividends on their plans (Axis Long Term Equity and Tata Ethical Fund) last week. But they have declared dividends only under regular plans, not under direct plans. Is this not a way to harass investors who put their money in direct schemes?
- Girijesh Sharma
The direct plans of these two schemes would not have declared dividends due to insufficient realised gains. Mutual funds can pay dividends only out of realised gains (or distributable surplus). Funds used to pay dividends from their premium reserves earlier, but Securities and Exchange Board of India (SEBI) in March 2010 has asked them to pay dividends only from the realised gains made on their portfolio. This means regular plans that have been around for a long time and with large corpus can declare more dividends. In comparison, direct plans have been around only since 2013 and they may not have huge realised gains to distribute among investors.
This article was originally published on February 15, 2016.
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