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MF News ‘India is probably the least expensive country post rationalization of TER’

‘India is probably the least expensive country post rationalization of TER’

Overall, India is the third least expensive country among 25 nations in terms of equity funds TER, claims a FIFA study.
Nishant Patnaik Aug 10, 2018

A study commissioned by Foundation of Independent Financial Advisor (FIFA) finds to be one of least expensive countries in the world going by fund expense ratios.

In fact, post rationalization of total expense ratio (TER) by SEBI, India is probably the least expensive country in the world, says the study.

Earlier in June 2018, 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%. Both these changes have led to a reduction in overall TER.

Overall, India is the third least expensive country in term of equity funds TER in the world based on March 2017 AUM. Norway and Japan follow India. The report says, “The difference in expense ratio between Norway, which is the least expensive country at 1.80% and India which is 1.88% is only 0.08%. Compared to Japan, which is the second least expensive country, India is at the same cost. The average total cost for equity funds before taxes across all countries is 2.15%. The costs range from a low of 1.80% (Norway) to a high of 2.83% (U.K.) with a spread of 1.03.”

In terms of fixed income funds, India stands at tenth position and sixth if, we compare countries with similar TER structure.

FIFA has conducted this study across 25 countries including 17 countries having bundled structure and 8 countries with unbundled structures. While cost of distribution and exchange charges are included in bundled structure, unbundled structure does not include such charges. However, the investors pay platform charges (if applicable) and investment advisory fees in addition to the TER in unbundled structure.

The study says, “Perceptions created on a plain reading of incomparable data led to the myth that costs in unbundled structures are lower than costs in bundled structures. However, the facts clearly contradict this perception. The average total cost for equity funds before taxes in case of countries (8 countries) following unbundled structures is 2.40% (refer Table 7 on page 31). The average total cost for equity funds before taxes in case of countries (17 countries) following bundled structures is 2.04%. Costs of owning equity funds before taxes in countries with unbundled structures is higher by 0.36% on an average compared with costs in countries with bundled structures. This clearly breaks the myth that unbundled structures are cheaper than bundled structures.”

The study is in stark contrast to the findings of Morningstar’s Global Fund Investor Experience Study 2017, which claims India to be among the most expensive countries in term of mutual fund TER.

The study further says that of 25 countries, India and Canada are the only two countries that do not have any front load charges. Also, India is the only country where exit loads are credited back to the scheme thereby benefitting the continuing investors.

 

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7 Comments
Ratnesh · 2 months ago
It should 1% TER for equity
0.5 for debt, for investors benefits, all MF distributor are so wise n intelligent they will well survive in lower TER also
Prashant · 2 months ago
Why bring it down to 1 & 0.5% if at this TER we are the second most cheapest country in the world? In the chart it shows we are equal with Japan so we are the second most cheapest and not the third. In fact SEBI allowing direct plans to increase TER is what I predicted long time back and have shared them in my previous replies which is coming true. These moves are to remove distributors and IFAs and give maximum profits to AMCs. Shame on them to risk cores of people's hard earned money and livelihood of hard working and honest IFAs for the benefit of few AMCs.
Shame shame shame
vikas · 2 months ago
we are ready for the same as we are hard working and smart and interested in increasing the market size but 1) remove direct and 2) are you ready if we were to reduce your pay by say 60%, dusre ki jaabe hamesha bhari lagti hein, but mehnat bhi karni padti hein, why dont you crossover to this size and see the whole idea of being on sword edge all the time
Reply
Rakesh · 2 months ago
Its Really Very Bad of the people who made laws sitting in AC offices and doesnt know the pain of Honest IFAs and some amcs and fools support their idea of killing IFAs in the industry
vikas · 2 months ago
its RIAs and AMCs vested interest
Reply
PERUMALLA sATEESH · 2 months ago
HI This P Sateesh from Hyderabad Regulator what they want exat they dont know with out expenses non compnay survive and evan governament also. any our expenses alredy regulated and again Y agin this people behind Mutual Funds it is a employment genrating area in USA also 2.03. If compartively yes oppose we should represent proprely.
Arvind Prasad · 2 months ago
In a training program we raise the issue of direct plan and all other events happened against us by sebi the AMC personal said that we are responsible for the events because we are not unitedly raise our voice against SEBi we are self centered and thus why SEBI is doing what they want if we are not raise our voice now unitedly I feel then it's to late make an organization in every area or zone wise and start protesting against SEBi and AMC for this behavior
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