In the last two months, at least 14 mutual fund schemes have closed down, according to announcements made by fund houses. The reason: they had less than 20 investors in the scheme or a single investor was accounting for more than 25 per cent of the corpus.

For instance, Canara Robeco Monthly Interval Plan, HSBC Interval plan 1, Fortis Quarterly Interval Plan L and ING Quarterly Interval Plan A have all closed down recently.

According to the Securities and Exchange Board's guidelines, any scheme should have at least 20 investors. Also, no investor can account for over 25 per cent of the corpus. 

Most of these schemes are all interval funds of fixed maturity plans. Interval plans are both open-end and closed-end in nature. That is, once the scheme is launched, they are open for a few days for subscription before they close for a specific time, say a month or three months. Then, they open again for fresh subscription or exit for another two-three days. 

Market experts said that these were small schemes with mostly high networth investors. Earlier, fund houses would aggressively market these funds to their HNI and corporate clients by showing a good quality 'indicative portfolio' and promising 'indicative returns.'

However, since October, heavy redemptions started in the mutual fund industry. FMPs were hit quite severely. Their average assets under management have fallen by over Rs 20,000 crore (Rs 200 billion) in the last three months. Akhilesh Singh, head, business development, Emkay Global Financial Services said, "In times of crisis, investors find it risky to stay in smaller funds. Therefore, they face more redemption pressure."

When the redemption pressure hit the fund houses, many risk-averse investors started moving out of these schemes. As a result, in some cases, the stake of a single investor went over 25 per cent of the corpus.