The mutual fund sector has seen a churn for quite a few years. The latest episode is a consultation paper issued by markets regulator Sebi on 18 May to revisit the total expense ratio (TER) of asset management companies (AMCs) and to introduce performance-linked fees. As expected, it received considerable media attention, mainly covering the impact of the proposed changes on the business of AMCs, distributors and investors. However, this article draws attention to some fundamental issues intrinsic to performance of mutual fund products.
