In May, the Securities and Exchange Board of India (SEBI) came out with a consultation paper on the total expense ratio (TER) charged by asset management companies (AMC) in India.
Since 2012, the market regulator has reviewed and made changes to provisions related to the fees and expenses charged by mutual fund houses. These changes include the introduction of direct plans, the fungibility of the total expense ratio, and additional expenses for net inflows from B-30 cities.
To enhance transparency and consistently align regulatory provisions with market dynamics and the best interests of investors, the market regulator conducted a comprehensive study on fees and expenses. SEBI determined that there was a requirement for further streamlining of provisions pertaining to TER.
CHANGES IN TER
In its consultation paper, SEBI stated that despite the maximum limit of the total expense ratio, there have been instances where the actual expenses borne by the investor exceeded the prescribed base TER limits for the regular plan.
For instance, fund houses can levy a TER of 2.25% for the initial ₹ 500 crore of the equity scheme’s daily net assets. However, the weighted average TER, which includes all additional expenses, paid by investors in the regular plan was 2.78%, surpassing the limit of 2.23%.
Despite the presence of various mutual funds with significantly large assets in schemes oriented towards retail investors (equity and hybrid schemes), the total expense ratio charged is mostly close to the prescribed regulatory limits.
However, in the case of debt schemes, where investors are mostly corporate and possess bargaining power, the total expense ratio is much lower than the prescribed limit.
هذه القصة مأخوذة من طبعة June, 2023 من Beyond Market.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 8500 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة June, 2023 من Beyond Market.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 8500 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
IMPORTANT JARGON
TRANSITIONING SFBs TO UBs: RBI’s NEW GUIDELINES - The Reserve Bank of India recently issued new guidelines outlining the transition process for Small Finance Banks (SFBs) to become Universal Banks (UBs).
NAVIGATING INDIA'S MARKET WITH HOWARD MARKS
Howard Marks' focus on cycles and capital preservation translates to a defensive strategy for India's frothy market: prioritize cash, target undervalued sectors, and diversify
FINDING A BETTER FIT
Switch health insurers at renewal to keep benefits such as waiting period and bonus, but weigh drawbacks
SILVER SQUEEZE
Green tech boom strains supply, propelling silver as a sustainable investment
A PODCASTING FUTURE
India's podcast scene explodes with formats and listeners, primed for digital growth, with high-quality content reigning supreme
BOUNCING BACK WITH DOMESTIC FOCUS
Despite challenges, India's tyre industry remains optimistic about doubling revenue by 2032
HIGHWAY HICCUPS?
Slowdown in awarding highway projects, driven by industry factors and project complexities, pushes NHAI towards debt reduction and private partnerships for sustainable development
CONTENT CONQUEST
JIOCINEMA'S ULTRA-LOW PLAN SHAKES INDIA'S STREAMING SCENE, AIMING FOR AD REVENUE AND LEVERAGING STRENGTHS TO BECOME A BIG PLAYER
CAUGHT BETWEEN CAUTION AND GROWTH
RBI's draft on project financing seems to be a pre-emptive measure to prevent large defaults on infrastructure loans. However, in their current form, the requirements look onerous for banks
HOT OR HYPE?
India's 2024 IPO market sizzles with investor cash, but will it be a blockbuster or a box office flop? Valuation worries linger