In the past two months, the regulator has decided to slash around 30-40 basis points (bps) of mutual funds’ total expense ratios (TERs); maybe guided by concern about declining alphas and realising scale economies on the back of rising profits of asset management companies (AMCs). Considering that deductions are coming out of TER components with the purpose of supporting distribution reach, maybe their utility is served and they deserve to be corrected.
Alpha-related discussions based on performance of last 1 year are avoidable since calendar year 2017 was an outlier. You don’t expect stock pickers to beat the index when everything is flying. In 2017, Nifty and Midcap 100 ran up by 28.65% and 47.26%, respectively, while BSE Small Cap did some number over 50-60%.
