IIFL Focused Equity Fund to levy 4% exit load in surprise move

IIFL Mutual Fund has increased exit load in IIFL Focused Equity Fund to 4 per cent if investors redeem their investments before 91 days, surprising industry watchers because generally equity mutual fund schemes levy only 1 per cent exit load for redemptions before one year.

Industry watchers believe IIFL took this action, implemented on August 2, on account of a huge allotment in the anchor investor category in HDFC Asset Management Company’s initial public offering (IPO).

IIFL Focused Equity Fund got an allotment of 1.73 lakh shares, worth Rs 19.03 crore, as per the anchor allotment list of HDFC AMC. On assets under management (AUM) of Rs 238 crore, the HDFC AMC stock will have an 8 per cent weight in the scheme.


HDFC AMC will list on the bourses on Monday.

As per various grey market indications, HDFC AMC could give listing gains of 50-60 per cent on its offer price of Rs 1,100 as it trades in grey market at a premium of Rs 550-650. If this happens, the net asset value of IIFL Focused Equity Fund could go up by at least 4 per cent on Monday due to HDFC AMC listing gains.

“There could have been an influx of money into the scheme ahead of HDFC AMC’s listing and hence to this money could probably go away post the NAV gains, prompting them to levy an exit load,” said S Shankar, founder of mutual fund advisory firm Credo Capital.

Private bankers believe some high net worth individuals (HNIs) have entered the IIFL scheme in the last one week, post the anchor allotment announcement. “Many smart investors bought into the scheme last week to pocket gains from HDFC AMCs IPO listing,” said a Mumbai-based private banker at a foreign bank who requested not to be named.

A spokesperson of IIFL AMC said it increased exit load to stop “investors who choose to quickly move in and out of the scheme” from taking any undue advantage. “We have taken this conscious decision to protect interests of our long-term investors," the person said.

Prior to August 2, IIFL Focused Equity Fund had an exit load of 2 per cent if redeemed before two months.

IIFL Focused Equity Fund is a multicap fund investing in a maximum of 30 stocks. Its top holdings include Bajaj Finance, HDFC Bank and Merck Limited, and it has given a return of 3.07 per cent over the last one year.