LIC Mutual Fund Revamps Portfolio: Revised Scheme Names and Exit Load Changes

May 31, 2024 Mutual Fund

LIC Mutual Fund, a leading player in the Indian mutual fund industry, recently announced two key changes to its offerings. The first involves renaming five existing schemes across various categories. The second pertains to a revision in the exit load structure for four equity-oriented schemes.

This article delves into these developments, analysing their potential impact on investors and exploring the broader context within the mutual fund landscape.

The changes made by LIC Mutual Fund for scheme name and exit loads aim to improve clarity, incentivise long-term investing, and potentially enhance investor returns. The fund house informed about these changes to its unitholders through a notice-cum-addendum.

• Renaming the Schemes – Aligning with Regulatory Guidelines

  LIC Mutual Fund has announced the name change of its five schemes, which include debt and equity schemes. In a notice-cum-addendum dated May 24, 2024 LIC Mutual Fund stated that Investors are requested to note that pursuant to paragraph 2.6 of SEBI Master Circular for Mutual Funds dated May 19, 2023, the name of the following Schemes of LIC Mutual Fund shall be revised as hereunder with effect from 1st June 2024:

  Existing Name of the Schemes	Revised Name of the Schemes
  LIC MF Children’s Gift Fund	LIC MF Children’s Fund
  LIC MF Medium to Long Duration Bond Fund	LIC MF Medium to Long Duration Fund
  LIC MF Banking & PSU Debt Fund	LIC MF Banking & PSU Fund
  LIC MF Focused 30 Equity Fund	LIC MF Focused Fund
  LIC MF Long Term Value Fund	LIC MF Value Fund

  (Source: LICMF Notice-cum-Addendum)  

  SEBI, vide its email dated 15th May 2024, has communicated its no-objection for the change in the name of the aforementioned Scheme(s) of LIC Mutual Fund.

  SEBI’s May 2023 master circular mandated mutual fund houses to ensure scheme names accurately reflect their investment objective and underlying asset allocation. LIC Mutual Fund’s move of renaming the schemes aligns with recent SEBI regulations that emphasize transparency and investor understanding in mutual fund offerings.

  The revised names provide clearer indications of the investment objective and asset allocation of each scheme. This can help investors make more informed decisions when choosing funds for their investment goals.

• Exit Load Modifications for Equity Schemes

  LIC Mutual Fund has also revised the exit load structure for four of its equity and equity-oriented schemes, effective from May 27, 2024. The fund house, in its notice-cum-addendum dated May 23, 2024, stated that the exit load structure of the following Schemes of LIC Mutual Fund shall be revised as hereunder:

  Scheme Name	Existing Exit Load	Revised Exit Load
  LIC MF Large Cap Fund	12% of the units allotted shall be redeemed or switched out without any exit load, on or before completion of 12 months from the date of allotment of units. 1% on remaining units if redeemed or switched out on or before completion of 12 months from the date of allotment of units. Nil, if redeemed or switched out after completion of 12 months from the date of allotment of units.	12% of the units allotted shall be redeemed or switched out without any exit load, on or before completion of 3 months from the date of allotment of units. 1% on remaining units if redeemed or switched out on or before completion of 3 months from the date of allotment of units. Nil, if redeemed or switched out after completion of 3 months from the date of allotment of units.
  LIC MF Large & Mid Cap Fund
  LIC MF Flexi Cap Fund
  LIC MF Aggressive Hybrid Fund (Erstwhile LIC MF Equity Hybrid Fund)

  (Source: LICMF Notice-cum-Addendum)  

  Previously, an exit load (a charge levied on redeemed units within a specific period) was applied if units had been redeemed within one year. The revised structure now applies the exit load only if redeemed within three months of investment.

  This change incentivises long-term investment by reducing the penalty for early redemption. Investors who stay invested for at least three months are not subject to any exit load, potentially encouraging a more disciplined investment approach.

  The revised exit load structure mentioned herein above shall be applicable prospectively for all investments (including SIP/SWP/STP registered) from the effective date and shall be in force till further notice.

  Notably, this move with a revised exit load structure potentially benefits investors who may need to exit their investments within a shorter timeframe. However, it’s crucial to remember that frequent buying and selling within short periods can be detrimental to long-term investment goals.

  [Read: Front-Running in Mutual Funds: Here’s How SEBI Plans to Keep Check]

What Should Investors Do?

Existing investors in the renamed schemes should review their investment objectives and risk tolerance. If these haven’t changed, and they are comfortable with the fund manager’s performance, there’s likely no need to take action.

Investors should note the revised exit load structure, which necessitates an earlier payment of the exit load if investments are redeemed within the new shorter timeframe of three months, as opposed to the previous 12-month duration. Hence, investors should align their investment strategies accordingly.

New investors considering these funds should thoroughly research the investment objective, risk profile, past performance, and expense ratio before investing.

To summarise…

LIC Mutual Fund’s recent changes aim to improve transparency and potentially enhance investor experience. The scheme name changes offer greater clarity, while the exit load adjustments provide increased flexibility. However, maintaining a disciplined investment approach and focusing on the underlying fundamentals remains essential for long-term wealth creation.

LIC Mutual Fund’s recent changes offer valuable insights into the evolving landscape of the Indian mutual fund industry. Regulatory bodies like SEBI are emphasising investor education and transparency in product offerings.

Additionally, mutual fund houses are increasingly focusing on long-term investment strategies to benefit investors seeking wealth creation over extended periods.

This article first appeared on PersonalFN here