How Is Kotak Mutual Fund’s Smart Facility For SIP, STP, SWP Different From Regular One?

Kotak Mutual Fund (KMF) has launched a “Smart Facility” for SIP, STP and SWP that changes the instalment amount for payments and withdrawals based on market valuations
How Is Kotak Mutual Fund’s Smart Facility For SIP, STP, SWP Different From Regular One?

The Kotak Mutual Fund on Monday announced the launch of a “Smart Facility” for SIP (Systematic Investment Plan), STP (Systematic Transfer Plan), and SWP (Systematic Withdrawal Plan) that let people invest or withdraw systematically through fixed instalments. The smart facility will ensure the instalments for the investments or withdrawals are based on market valuations.

The new facility will be available for all open-ended equity schemes, equity index funds and Kotak Equity Hybrid Fund.

In a press note, detailing the new facility, Kotak Mutual Fund managing director and CEO Nilesh Shah said, “The Smart Facility will help investors who are looking for an equity valuation-based investment approach for their long-term goals.”

He said that as the equity markets continue to be volatile, “Smartness is in using this volatility in our favour. This is a simple yet powerful tool for systematic investments, which is easy to understand and even easier to invest in.”

How Is The Kotak Mutual Fund Smart Facility Different? 

The facility allows investment and withdrawal based on equity valuations, which will be categorized as either “cheap, neutral or expensive”, as fixed by the fund house.

Normally, instalments for SIPs and SWPs are fixed. 

“When valuations are expensive, the default SIP instalment will be half (0.5x) of the base SIP amount and when valuations are cheap the instalment would be (2x) of the base SIP amount,” said the press release.

For example, if the SIP amount is Rs 1,000 and the market valuations are deemed expensive by the fund house, the SIP amount debited from your account would come down to Rs 500. On the other hand, when the valuations are cheap, the amount debited would be twice the base amount, which will come to Rs 2,000.

The Kotak Mutual Fund Smart Facility will allow investors to choose the minimum and maximum SIP amount.
Investors can also avail the facility for redemptions through SWP, allowing investors to redeem a higher amount when the equity valuations rise and a lower amount when they become cheap. The same logic of 0.5x and 2x will apply based on market valuations for SWP installments, as in the case of SIPs. 

This option is also available through the Systematic Transfer Plan (STP) route.

According to the company, “valuations are decided based on the net equity allocation of the Kotak Balanced Advantage Fund,” using “a combination of the Price to Earnings ratio (P/E), and the trend and the sentiment data”.

The Smart Facility is also available for Kotak Equity Hybrid Fund. The fund strategy does not change.
The facility uses the per cent of the net equity allocation of Kotak Balanced Advantage Fund to derive the SIP, STP, and SWP instalment.

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