Every mutual fund scheme is launched through a New Fund Offer (NFO) which can range for a maximum of 30 days, as per the guidelines issued by market regulator SEBI (Securities and Exchange Board of India).
There are two types of mutual fund schemes on the basis of subscription period – open-ended schemes and close-ended schemes. While the units of an open-ended scheme can be purchased and redeemed even after the closure of the NFO period, the same is not true for close-ended funds. An investor can purchase the units of a close-ended scheme from a fund house only during the NFO period and can redeem them with the fund house only after maturity which typically ranges from 3 to 7 years.
But what if, an investor needs to redeem a close-ended fund before its maturity? By the very nature of close-ended funds, it is not possible to purchase or redeem their units from the fund house outside the NFO period. However, there is a way out.
In order to provide an exit route to the investor of a close-ended fund, SEBI has mandated fund houses to either list the units of its close-ended schemes on a stock exchange or allow an investor to sell the scheme units to the fund house through periodic repurchase at NAV (Net Asset Value) related prices.
Using the former option, an investor can step out of a close-ended scheme by selling his/her scheme units through stock exchanges.
Mutual fund platforms of two major stock exchanges where close-ended scheme are listed include:
- National Stock Exchange’s (NSE) mutual fund platform – NMF II (https://www.nsenmf.com/)
- Bombay Stock Exchange’s (BSE) mutual fund platform – BSE StAR MF (https://bsestarmf.in/index.aspx)
Why Should I Invest in Close-ended Funds?
In mutual funds, open-ended schemes are relatively more popular than close-ended funds. However, like open-ended funds, they also offer some unique benefits. Some of them are listed below:
Unique Portfolio: The fund manager of a close-ended fund carries no redemption burden or pressure. Thus, he/she has an opportunity to explore undervalued equity and debt instruments even if they come with a low liquidity profile. Such unique portfolios can potentially given exemplary returns.
Concentrated Holdings: A close-ended scheme can invest in relatively few stocks, around 25-30. This allows a close-ended mutual fund scheme to take and benefit from concentrated positions.
Stability: Unlike an open-ended scheme, a close ended scheme is not exposed to sudden and large movements of funds. Due to the absence of sudden inflows and outflows of cash, a fund manager is neither forced to sell a scheme’s holding at low prices, nor forced to buy securities at sky-high valuations. The lock-in feature of a close-ended fund allows fund managers to focus on selection and performance monitoring of securities.
Long-term benefit: Due to the lock-in period of close-ended schemes, the investors save themselves from getting tempted to participate in potentially risky short-term market movements. By remaining invested in a close-ended scheme till its maturity which ranges to 3-7 years, an investor can potentially take home the maximum possible returns.
Here is a List of Mutual Funds You can Invest in FY 2020:
| Fund Name | Fund Assets (Cr) | 1 Year Return | 3 Year Return | 5 Year Return |
| SBI Small Cap Fund | 2,704 | 8.33% | 11.28% | 17.04% |
| Mirae Asset Emerging Bluechip Fund | 8,219 | 18.27% | 14.40% | 17.53% |
| Canara Robeco Emerging Equities Fund | 5,235 | 10.38% | 11.25% | 13.89% |
| Nippon India Small Cap Fund (earlier Reliance Small Cap Fund) | 8,425 | -2.60% | 8.14% | 11.82% |
| Kotak Emerging Equity Scheme | 4,960 | 11.35% | 8.38% | 12.89% |
| ICICI Prudential All Seasons Bond Fund | 2,816 | 11.28% | 8.24% | 9.91% |
| Franklin India Dynamic Accrual Fund | 4,012 | 9.51% | 9% | 9.98% |
| SBI Magnum Medium Duration Fund | 1,942 | 11.77% | 9.31% | 9.80% |
| Axis Strategic Bond Fund | 1,188 | 8.32% | 7.68% | 9.11% |
| PGIM India Dynamic Bond Fund | 42 | 13.69% | 9.32% | 10.08% |
| HDFC Hybrid Equity Fund | 21,087 | 9.44% | 9.50% | 10.22% |
| Aditya Birla Sun Life Balanced Advantage Fund | 2,689 | 9.99% | 8.20% | 9.46% |
| ICICI Prudential Equity & Debt Fund | 23,487 | 8.11% | 10.41% | 10.65% |
| Kotak Asset Allocator Fund | 42 | 11.09% | 9.29% | 9.12% |
| ICICI Prudential Balanced Advantage Fund | 27,956 | 12.79% | 10.40% | 10.37% |
| Mirae Asset Emerging Bluechip Fund – Growth | 8868 | 16% | 17% | 16% |
| Axis Small Cap Fund – Direct Plan | 1200 | 23% | 16% | 13% |
| Axis Long Term Equity Fund – Direct Plan | 21492 | 18% | 18% | 12% |
| IIFL Focused Equity Fund – Direct Plan | 446 | 29% | 16% | 12% |
| Invesco India Growth Opportunities Fund – Direct Plan | 1991 | 14% | 18% | 12% |
| Axis Midcap Fund – Direct Plan | 3551 | 18% | 19% | 12% |
| Axis Small Cap Fund – Growth | 1200 | 21% | 14% | 12% |
| JM Multicap Fund – Direct Plan | 143 | 19% | 16% | 11% |
| DSP Natural Resources and New Energy Fund – Direct Plan | 380 | 0% | 9% | 11% |
| Axis Bluechip Fund – Direct Plan | 8749 | 22% | 21% | 11% |
| Axis Long Term Equity Fund – Growth | 21492 | 17% | 16% | 11% |
| JM Tax Gain Fund – Direct Plan | 35 | 16% | 16% | 11% |
| Invesco India Mid Cap Fund – Direct Plan | 621 | 6% | 13% | 11% |
| Kotak India EQ Contra Fund – Direct Plan | 874 | 14% | 17% | 11% |
| IIFL Focused Equity Fund – Growth | 446 | 27% | 14% | 11% |
| DSP Natural Resources and New Energy Fund – Regular Plan | 380 | -1% | 8% | 11% |
| Axis Midcap Fund – Growth | 3551 | 16% | 18% | 10% |
| Invesco India Growth Opportunities Fund – Growth | 1991 | 13% | 16% | 10% |
| Canara Robeco Bluechip Equity Fund – Direct Plan | 257 | 18% | 17% | 10% |
| Axis Bluechip Fund – Growth | 8749 | 21% | 19% | 10% |
| DSP Equity Fund – Direct Plan | 2888 | 20% | 15% | 10% |
| JM Tax Gain Fund – Growth | 35 | 16% | 15% | 10% |
| Kotak India EQ Contra Fund – Growth | 874 | 12% | 15% | 9% |
| DSP Equity Fund – Regular Plan | 2888 | 19% | 14% | 9% |
| Canara Robeco Bluechip Equity Fund – Regular Plan | 257 | 16% | 16% | 9% |
| Canara Robeco Equity Diversified – Direct Plan | 1581 | 14% | 16% | 9% |
| Tata Mid Cap Growth Fund – Regular Plan | 747 | 10% | 11% | 9% |
| Canara Robeco Equity Diversified – Regular Plan | 1581 | 13% | 16% | 8% |
| Invesco India Infrastructure Fund – Direct Plan | 41 | 12% | 13% | 7% |
| Invesco India Infrastructure Fund – Growth | 41 | 10% | 11% | 6% |
| LIC MF Infrastructure Fund – Direct Plan | 55 | 15% | 11% | 5% |
| LIC MF Infrastructure Fund – Growth | 55 | 13% | 10% | 4% |
| Mirae Asset Tax Saver Fund – Direct Plan | 2671 | 18% | 20% | – |
| Mirae Asset Tax Saver Fund – Regular Plan | 2671 | 16% | 18% | – |
| SBI Bluechip Fund – Growth | 22754.43 | -6% | 5% | 10% |
| SBI Magnum MultiCap Fund – Growth | 7582.94 | -5% | 7% | 12% |
| Motilal Oswal Multicap 35 Fund – Regular Growth | 13634.94 | -10% | 8% | 15% |
| Aditya Birla Sun Life Tax Relief 96 – Direct Growth | 8912.66 | 9% | 14% | 12% |
| Mirae Asset Hybrid Equity Fund – Direct Growth | 2037.71 | 15% | 15% | NA |
| DSP Equity & Bond Fund – Direct Growth | 6360.93 | 17% | 12% | 11% |
| HDFC Index Sensex – Direct Plan Growth | 399.64 | 18% | 17% | 9% |
| Nippon India Index Fund Sensex Plan – Direct Growth | 22.55 | 18% | 17% | 8% |
| Mirae Asset Large Cap Fund – Direct Growth | 13064.85 | 16% | 17% | 13% |
| L&T India Value Fund – Growth | 8404.03 | -13% | 6% | 11% |
| DSP Equity Opportunities Fund – Growth | 5720.56 | -8% | 6% | 10% |
| L&T Tax Advantage Fund – Growth | 3420.69 | -13% | 7% | 9% |
| ICICI Prudential Bluechip Fund – Growth | 22182.14 | -6% | 8% | 9% |
| Aditya Birla Sun Life Tax Relief 96 – Growth | 8912.66 | -13% | 7% | 11% |
| L&T India Large Cap Fund – Direct Growth | 493.11 | 16% | 13% | 8% |
| Tata Retirement Savings Fund Moderate Plan – Direct Growth | 1100.88 | 13% | 15% | 13% |
| Tata Retirement Savings Fund Moderate Plan – Regular Growth | 1100.88 | -8% | 8% | 12% |
| Tata Index Sensex Direct Plan | 12.11 | 18% | 17% | 9% |
| HDFC Index Sensex Fund – Growth | 399.64 | -2% | 11% | 8% |
(Data as on Dec 6, 2019; Source: Value Research)
Also Read : How to Redeem Mutual Funds Online
3 Comments
i invested some amount in Closed ended fund three years ago can i redeem it now
please guide me
dear Deepali
i bought sundaram Multicap Fund series 1 when it came under NFO 0n 28 June 2018 for the sum of 16 lacs. However i thought that it was an open ended scheme by mistake. I need the money now, Is there any way to get out of this ?
Thanks for your information
sincerely
bernard Paul
yes, you should be able to redeed, you need to contact fund manager or house