Hold your mutual funds units in demat

Mutual fund investors can now choose to have their holdings in dematerialised form, with National Security Depository Ltd (NSDL) announcing that it will enable the same for its demat holders. For MF investors, this is a good news as it will enable them centralise all their investment holdings. “A demat account will allow the investors to view their investments as a single snapshot. This is any day an advantage over calculating their holdings from going through several statements,” said Mr Rajnish Rastogi, Senior Vice-President and Co-Head of Equities, Motilal Oswal.

“Customers will now get one simple statement for all their holdings with all the AMCs. Earlier, if a customer held 15 schemes in 10 different fund houses, he would get that many number of statements. Now with MFs being available in demat format, investors can manage their portfolios better. They can monitor all the schemes in one go,” said Mr C. J. George, Managing Director at Geojit BNP Paribas Financial Services.

However, this demat holding would entail a charge, much like shareholders paying for their demat accounts. Fund house officials believe that the best fee structure would be a flat one based on a time period, rather than a fee structure linked to Assets Under Management.

The fee must be reasonable enough to attract mutual fund investors, fund managers said. Officials at some mutual fund houses said this demat offer could attract more investors. Others felt there is still an aversion and mistrust among investors towards dematerialised holdings. This could eventually see an increase in mutual fund trading, since trading of dematerialised units would be faster and simpler.

A demat account for MFs would work much like that for shares. One can subscribe to mutual fund units through one's stock broker using the stock exchange platform. Upon subscription, the Asset Management Company (AMC)/Registrar and Transfer Agent (RTA) will credit the mutual fund units to one's demat account.

For existing mutual fund holdings, the investor has to obtain a conversion request form from his Depository Participant. After verification, the AMC/RTA will credit the mutual fund units into the investor's demat account.