MF investors hit by double whammy as expense fee rises amid market decline

Mutual fund regulations give the maximum TER that can be charged for a scheme on the basis of the AUM

- Srushti Vaidya

Mutual fund investors are facing a double whammy—not only are returns lower because of the recent decline in the stock markets but asset management companies have also increased their expense ratios, the fee charged to them.

Of 618 direct equity mutual fund schemes (those that do not have a distribution commission), 62% increased their total expense ratios from September 2024—when the indices started to fall—to March 2025, according to a Mint analysis. The analysis showed that 21% of the schemes reduced their expense ratios and 17% maintained the same rate.

The total expense ratio (TER) is a measure of the costs of managing and operating a mutual fund and is paid by those who invest in it. Typically, asset managers raise the TER when a scheme's assets under management decline.

However, the Mint analysis found that among the 381 direct equity schemes that increased TERs, the assets of 284 schemes, or 74%, actually increased.

The market regulator has prescribed a slab-based structure for TER, where the maximum that can be charged depends on the size of the scheme's assets.