Listen to this article
The Foundation of Independent Financial Advisors (FIFA) said that India has the lowest TER in both equity and debt funds.
In a letter sent to SEBI, the association said that there is no scope of further cut in TER considering the fact that India has the lowest TER compared to other economies. It said, “Given the low expense ratios and pass-through of economies of scale during the last round of cuts, there may not be further scope of passing on the benefits of economies of scale to investors.”
The association further said that if TER moves from fund level to AMC level, it could affect innovation in products. It said that there will be no incentive to spend on new products or fund ideas. The objective of passing on economies of scale is still being fulfilled through the current regulation, said the association.
Further, the association said that equity-oriented schemes comprise 50% of the total AUM but generate 84% of the total revenue. Any further reduction in the TER limits for equity-oriented schemes will have a significant impact on the revenue and profitability of the entire industry and would also impact the viability of running other category schemes at low cost, said FIFA.
The association said that these decisions should be left to trustees as they act in the best interests of unitholders.
