Running on a treadmill

For AMCs, the growth of AUM does not translate into profit growth

-  Arul Selvan

The abolition of price-control measures was one of the basic tenets of the new economic policy adopted by India in 1991. The move was aimed at making the Indian economy more competitive. However, even after three decades, price control continues to be ingrained in the system.

SEBI’s recent study on the fees charged by mutual fund companies exemplifies this point. The fees charged by asset management companies (AMC) in India are already subject to a price cap that decreases in line with an increase in assets under management (AUM).

It is pertinent to note that this cap, which was revised (downwards) only in 2018, was actually a result of SEBI’s earlier endeavour to reduce mutual funds’ fees.