In a circular issued yesterday, SEBI has clarified that it would bring fresh TER slabs once it make changes to the existing mutual fund regulations.
The SEBI circular says, “All other decisions of the Board with respect to ‘Review of Total Expense Ratio (TER) of Mutual Fund Schemes’ as mentioned in the press release dated September 18, 2018 issued by SEBI would be implemented pursuant to amendment to SEBI (Mutual Funds) Regulations, 1996.”
Earlier in September, SEBI has announced fresh AUM slabs and given a roadmap to fund houses on how they can make changes to their TER based on asset size of the scheme. While the market regulator has capped TER at 2.25% in equity funds and 2% in other than equity funds, SEBI has followed economies of scale to reduce TER systematically.
Similarly, fund houses cannot charge more than 1.25% in close end equity funds and 1% in close end debt funds. SEBI has also asked fund houses to charge a maximum TER of 1% on passive funds such as index funds and ETFs.
On fund of funds (FOFs), SEBI has said that FOFs investing in liquid, index and ETFs cannot charge over 1%. On the other hand, FOFs investing primarily in actively managed funds can charge up to 2.25% in equity funds and 2% in other than equity funds.
