InvestorQ : Why many AMC's are doing inter scheme transfers in mutual funds?
seema Upadhyaya made post

Why many AMC's are doing inter scheme transfers in mutual funds?

krithika Saxena answered.
2 years ago
Inter scheme transfer refers to the transfer of securities from one scheme to another within the same fund house. Funds house generally makes inter scheme transfers with a view to capturing best returns for the investors such as by changing the composition of the portfolio. For example, at a particular time, the debt funds are cheap and equity is at higher prices, in that case, the fund manager will sell out some of the investment in equity to get a higher price and purchase units in a debt fund to get more units in the same price.

Therefore, when the debt funds would rise he could sell them for a better margin. This is how fund managers work to increase the overall profit of the portfolio. This is a general practice in most of the fund houses.

However, after the Franklin Templeton fiasco, the inter scheme transfers came in a sudden highlight. By making inter-scheme transfers several mutual fund houses are trying to manage their redemption pressure in debt funds. This practice is not new but considering the present circumstances, be it pandemic of Franklin issue, there has been an increase as there’s a liquidity crunch in the market, downgrade in debt investments, and trust of investors being shaken. Some are also claiming that due to such transfers hybrid funds would be affected the most, however, it may not hold true for most of the cases as this is just a temporary action by mutual fund houses.