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Birla Sun Life AMC changes names of 3 monthly income plans

LiveMint logoLiveMint 25-05-2017 Kayezad E. Adajania

Mumbai: Birla Sun Life Asset Management Co. Ltd changed the names and structure of three of its monthly income plans (MIPs) on 23 May. Birla Sun Life MIP (BMIP) has become Birla Sun Life Long Term Accrual Fund (BLAF), Birla Sun Life Monthly Income (BMI) has changed to Birla Sun Life Low Duration Fund (BLDF) and Birla Sun Life MIP II - Savings 5 Plan (BMI5) has become Birla Sun Life Credit Opportunities Fund (BCOF).

While the three schemes were earlier hybrid schemes—they invested in both equity and debt instruments—the new avatars will be pure debt schemes. Under Sebi’s 1996 rules, a fund house must give an exit option to existing investors if a fundamental attribute (a key feature of a  ese three schemes.

The fund house has already made changes to the portfolios (removed the equity exposure) and appears to have removed the fund managers who used to manage equities in these schemes. As per Value Research data, Sunaina Da Cunha is the sole fund manager of all three schemes. Earlier, each of these funds had at least two fund managers, indicating one used to manage equity and the other debt investments.

The change from a hybrid to a pure debt fund is a change in the fundamental attribute. Why did Birla Sun Life AMC not give investors an exit option? The fund house’s spokesperson told Mint that it had in fact given an exit option on 24 March when the fund house had issued a notice intimating investors that the asset allocation of few of its hybrid schemes (including BMIP, BMI and BMI5) were being changed to allow investment in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

Since the schemes were changing their asset allocation, it was a change in their fundamental attributes and hence existing investors were given an exit option. Those investors who disapproved of the option of investing in REITs and InvITs were free to exit without paying an exit load by 11 April. The schemes have an exit load of 1% if withdrawn upto 1095 days. But earlier this week, when the schemes changed their names, the fund house didn’t offer an exit option.

“We had given an exit option after our 24 March circular. In fact, as per the revised asset allocation laid out in the March notice, it is clear that the said schemes can invest as little as nil and as much as 5% in equities in two of schemes and up to 15% in the third scheme. The same mandate allows the fund managers to have zero exposure in equities. That option still prevails, so nothing has changed. Hence, there is no need to give an exit option”, said the Birla Sun Life Asset Management Co Ltd spokesperson.

Still, going by their new names, Birla Sun Life Long Term Accrual Fund (earlier BMIP), Birla Sun Life Low Duration Fund (earlier BMI) and Birla Sun Life Credit Opportunities Funds (earlier BMI5) are now all debt schemes. By changing the names to those of debt fund schemes, the fund house is indicating that it will not invest in equities at all. Investors who use MIPs expect up to 30% allocation in equity. For them, it is a fundamental change of the scheme.

So, while the fund’s March notice may have ticked a regulatory box, it is likely to leave some investors unimpressed.

“It’s very unacceptable that the fund house went ahead and made portfolio changes and removed the equity fund managers even before the notice (on 23 May) was issued. It should have first given an exit option to investors. This is clearly a case of change in fundamental attribute”, said a mutual fund distributor on condition of anonymity.

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