Total Expense Ratio CUT FOR EQUITY MFs..

Total Expense Ratio CUT FOR EQUITY MFs..

 The Securities and Exchange Board of India (SEBI) has cut the fees that mutual funds charge investors for handling their money, modified the consent mechanism for securities market offenders and introduced rules for mandatory debt market borrowings for large companies.

These, along with other measures announced by the regulator after its board meeting on September 18, 2018, are aimed at making it cheaper to invest in mutual funds and protecting the interests of small investors.

The capital market regulator also decided to go with the HR Khan panel recommendations, which sought the easing of restrictions the regulator had imposed on investments by non-resident Indians (NRIs) and some foreign funds. That will ease the concerns of overseas investors worried about tighter norms.

TER CUT FOR EQUITY MFS

Investors in equity mutual funds will benefit from the cut in total expense ratio (TER) - the fee funds collect from investors every year. Sebi has cut the expense ratio for open-ended equity schemes on the basis of size - larger funds will have to slash fees by a bigger amount.

Investor Savings of Rs. 1,500 crore

For instance, the expense ratio for schemes with assets under management (AUM) up to Rs. 500 crore will be 2.25% every year. Funds with assets above Rs. 50,000 crore will be able to charge 1.05% annually.

The regulator also barred the mutual fund industry from doling out upfront commissions to distributors.

The cut in total expense ratio could lead to investor savings of about Rs. 1,500 crore, said whole-time member Madhabi Puri Buch at a press conference after the board meeting.

“We are glad that upfront payouts will stop and the industry will move to a full trail model of payment, which is the right way to compensate distributors. Mutual fund is becoming a pull product which is favourable,” said Mr. Swarup Mohanty, CEO, Mirae Asset Mutual Fund.

“Though profitability will come down in the near term, it will be compensated by higher volumes in the coming days.”

Share: