Some mutual fund companies are not allowing investors to redeem their money freely.

On Wednesday, when a wealth manager tried to redeem a couple of ABN Amro Fixed Maturity Plans (FMP) because her client was panicking over the current market conditions, she was told that she could not take out more than Rs 1 lakh per day. For her client, who wanted to redeem more than Rs 10 lakh, this meant he would have to stagger the redemptions every day for ten days, even if the scheme's price keeps falling.

"My client is livid. When it comes to such large amounts, every day makes a difference," says the wealth manager, asking not to be named. "How can they hold back our money? Just as you can break an FD, you should be able to redeem an FMP." An FMP is similar to a fixed deposit, but within a mutual fund.

But nothing can be done. Relying on the fine print which allows mutual fund companies to restrain their redemption policies under extraordinary circumstances such as these, these funds are exercising their right to reduce huge outflows. While some fund companies are increasing the number of days it will take to get funds out, others are restricting the amounts that can be redeemed while some have suddenly introduced exit loads.

Duetsche Mutual Funds sent out a mass-mailer late yesterday saying, "Please be informed that with immediate effect for all redemptions booked in any of our fixed term funds wherein the tenure is more than 3 months, the payout would happen on T+9 business days." ABN Amro restricted redemptions to no more than Rs 1 lakh per day per folio, and not per scheme. (This means that if you hold six schemes, but they are all listed under one folio, you can still take out only Rs 1 lakh per day.)

Nikhil Johri, MD of ABN Amro Asset Management Company, said, "We are limiting the number of redemptions as a short measure. In a special situation, the trustees of the fund reserve the right to limit the redemption for a period of time, till market conditions stabilize." He added that this is in the interest of those investors who stick it out in the fund.

"We are limiting redemption to 5% of our portfolio per day to protect the interests of those investors who choose to stay on till maturity," said Johri.

Dhirendra Kumar, head of Valueresearch, a mutual fund tracking company, said, "While this kind of practice looks unethical at the outset, it may be ethical in the larger goal, particularly in the case of FMPs."