A graded fee structure that allows mutual funds to charge higher fees for smaller schemes may be leading to smaller size of new fund launches, data shows.
A look at data from fund-tracker Value Research shows that the largest number of equity funds is in the category with the lowest assets under management (AUM). Funds with AUM of less than Rs.100 crore account for 164 out of 451 equity schemes that are currently offered by Indian mutual funds. They have a median expense ratio of 2.86%. That is followed by 139 funds that manage assets between Rs.100 crore and Rs.400 crore which have a slightly lower expense ratio.
The Securities and Exchange Board of India (Sebi) allowed a graded fee structure so that smaller schemes—which are allowed to charge larger amounts—can meet their expenses better. There are also additional charges allowed for reaching out to areas beyond the top 15 cities.
