The regulator has asked AMCs to launch
direct plans for existing and new schemes.
The much
awaited SEBI guidelines outlining the framework on implementation of the announcements
made on August 16 are finally out.
On one of
the keenly awaited move by the industry regarding direct plans, SEBI has said
that AMCs will have to provide direct plans in their existing and new schemes
with a separate NAV from 01 January, 2013.
Industry
officials believe that the TER on direct plans could differ from one fund house
to another depending on the corpus of the scheme. On the contrary, some say
that AMFI could formulate the TER on different asset classes which could be
followed by all AMCs.
The
industry has been given more than three months’ time to implement the move.
Officials
say that it is difficult to define the exact difference in TER in direct plans at
this juncture as the commission structures differ on each asset class across AMCs.
A direct
TER will be arrived at by deducting the distribution and commission expenses in
a scheme. Apart from an upfront, fund houses pay 50 basis to 70 basis points trail
commission in equity schemes. The commissions are lower on debt schemes. So, one
could assume that a difference of at least 100 basis points in a direct plan.
While the
distribution community is worried over the implications of direct plans, AMCs
too do not seem to be gung ho about promoting direct plans. While AMCs may be
able to retain higher revenues in direct plans; it also at the same time poses challenges
on infrastructure and costs to service direct investors.
While
retail investors could still need the handholding of advisors, industry
speculates that a lot of HNIs and institutions could shift to direct plans, who
largely invest in debt funds.
SEBI has
further said that AMCs will have to do away with multiple plans like retail,
institutional and super-institutional. Such plans currently exist mostly in
debt funds and a handful of equity schemes.
AMCs will now
have to formulate a mechanism to charge a uniform TER under the new guidelines
of single plans, keeping in mind the interests of varied client base covering
both institutional clients and retail clients.
Earlier Puneet Chaddha, CEO, HSBC Mutual Fund had told Cafemutual that AMCs could devise a TER based on the underlying investors in a scheme. “The uniform expense structure could be arrived at by looking at the underlying category of investors invested in a particular scheme. If the scheme has predominantly institutional clients then the expense structure would mirror that”.
SEBI has said that existing schemes with multiple plans based on the amount of investment (i.e. retail, institutional, super-institutional, etc) shall accept fresh subscriptions only under one plan. It says that other plans will continue till the existing investors remain invested in the plan.
