In its communication sent to investors, Quantum Mutual Fund has announced that the fund house will launch regular plans of all its schemes with effect from April 1 2017. Simply put, the fund house, which is known for its direct-to-investor model, will start paying commissions to distributors.
Upholding SEBI’s move on commission disclosure, the fund house has said, “From the very beginning, Quantum has adamantly maintained that we have no problem using the distribution model as long as commissions are disclosed to investors. We have been accused of being anti-distributors, of denying others the right to an income, and have weathered a decade's worth of invective from some folks who simply have not comprehended what we have been saying. We have said it over and over again through the years: we are happy to work with distributors if their commissions are disclosed. It's as simple as that.”
The fund house has clarified that they will not pay upfront commission to their distributors. Instead, they would pay trail commission of 0.15%, 0.20% and 0.25% of AUM in the first three years consecutively. Fourth year onwards, Quantum MF will pay commission of 0.15% of AUM.
“In keeping with our philosophy of being a low cost fund, the commission structures proposed here are amongst the lowest in the industry. The aim is not to make distributors rich, but to compensate them fairly for their advice and for the expenses, which they may bear. Further, the distributor doesn't get rewarded if he switches investments in and out of our funds, but only if investors' savings remain with us for the long term: the distributor earns higher commission only after completion of 24 months, thereby encouraging the culture of long-term investing,” wrote the fund house in the communication sent to investors.
The fund house has been around for over ten years but due to its direct-to-investor model, its AUM still stood at Rs.860 crore as on December 2016. “We have sacrificed our growth of AUM and remained steadfast to our principle of transparency, because we adhere to the simple belief that an investor should know what he is being charged for a service.”
So far, a few national distributors like FundsIndia and Prudent distribute Quantum’s direct plans MF schemes.