Redeem Fractional Units in ETFs/Liquid Bees

Liquid Bees (and other ETFs) declare daily dividend which gets reinvested in the same scheme on daily basis. The units arising out of dividend reinvestment result in fractional units. (The Units are allotted up to three decimals).

As the minimum trading lot that an investor can sell on NSE is 1 Unit the fractional Units of the Scheme cannot be traded on NSE.

Note – If you regularly invest in Liquid Bees, it makes sense to let the fractions accumulate until it becomes whole units. Since there is no custody charge, it does not cost you anything to keep fractional units in your demat account. However if you decide to sell, you can sell whole units on the market, while for the fractions, AMC offers anytime buyback of fractional units.

Buy Back Of Fractional Units

In order to provide an exit option to investors who are holding fractional Units of the Scheme in their demat account, the scheme offer a buy back facility to Unit holder holding fractional Units in Liquid BeES/ETFs. The buyback will be processed on the first working day of the week.

How Investors Can Redeem Fractional Units of ETFs

[1] Investors who hold fractional units in their demat accounts should transfer the fractional units by submitting an off-market delivery instruction slip (DIS) duly filled and signed to their respective Depository Participant directly.

* Off Market Transaction: Off Market transaction is one which is settled directly between two Demat Account Holders without using the broker and where no Clearing Corporation / Clearing House is involved.

[2] The DP will execute the transfer of fractional Units from the Unit holder’s demat account to the demat account of the scheme (Target Account i.e. Scheme Account).

[3] The AMC / Registrar will track the Units received in the Target Account and once sighted, the fractional Units will be considered for Redemption as on the date of receipt of such fractional Units in the Target Account.

[4] The AMC/ Registrar will obtain the bank account details of the Unit holder from the Depository database and the Redemption proceeds for the fractional Units will be paid / credited to such bank account of the Unit holder.

Fractional Units in Mutual Funds

Example: An investor invested Rs.5000 in mutual funds, at an NAV of Rs 17.91 and got 279.155 units.

Is it okay to accept units in fractions? How, if at all can these fractional units be sold?

Since all units are issued in electronic form, you can sell or purchase fractional units. However the procedure for doing this requires the investor to fill a physical form and send it to the concerned mutual fund. Alternatively, the investor can hold the fractional unit until it becomes 1 whole number.

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