In accordance with SEBI board meeting held in March, the regulator lowered the additional expense charged in lieu of exit loads by mutual fund schemes with effect from 29th May 2018. Only schemes charging an exit load (open-ended schemes without lock-in) can levy the additional 5 basis points charge.
In 2012, the regulator had permitted mutual funds to charge up to 20 basis points of scheme AUM as a compensation for exit load. However, a Mint report stated that the funds were overcharging investors by levying expenses in excess of the expected amount brought in by exit load.
As per a PTI report, across all equity and balanced schemes an average exit load of around 5 basis points has been credited to the scheme whereas the additional expense charged to these schemes was between 18-20 basis points. In comparison the additional expense charged was lower than actual exit load credit back in case of open ended debt schemes.
The drastic reduction in TER will reduce cost of investing in MFs. However, distributor commissions could be hit by this move.
In addition to slashing TER, the regulator also gave a green signal to sharing all investor related disclosures in electronic format in accordance with its ‘Go Green’ initiative. Thus schemes will no longer need to publish daily net asset value (NAV), sale or repurchase prices in newspaper instead investors can view the data on mutual fund site or AMFI portal. Furthermore, mutual funds can now upload statement of scheme portfolios and scheme annual reports or abridged summary on AMFI website or their website instead of mailing them to investors whose email id is not registered with the fund house.
