Mutual fund distributors have a reason to cheer. The talks around reduction in expenses chargeable to mutual fund schemes seems to have been put on backburner for now.
SEBI has amended mutual funds regulations in which it has not made changes to the expense ratio slab. That means, fund houses can continue to charge up to 2.50% on equity funds and 2.25% on debt funds.
A reduction in expense ratios could have led to a cut in trail commissions that distributors earn on their assets under advisory.
Expense ratio slab
AUM |
Equity TER |
Debt TER |
Up to Rs.100 crore |
2.50% |
2.25% |
Next Rs.300 crore i.e. up to Rs.400 crore |
2.25% |
2% |
Next Rs.300 crore or up to Rs.700 crore |
2% |
1.75% |
Above Rs.700 crore |
1.75% |
1.50% |
Source: SEBI
However, SEBI has incorporated changes to the additional expenses that fund houses charge for B30 expansion and exit loads. While the regulator has revised the definition of top cities and beyond top cities for additional TER, it has reduced expenses charged in lieu of exit to 0.05%.
Apart from these additional charges, fund houses can also charge up to 0.12% for cash market transaction and 0.05% for derivative transaction as brokerage and transaction cost for execution of trade.
If we put together all the expenses, fund houses can charge 0.52% (0.30% for B30 expansion, 0.05% in lieu of exit loads and 0.17 for executing trades) additionally. This shows that fund houses can charge up to 3.02% and 2.77% in equity funds and debt funds, respectively.