Three years after the Securities and Exchange Board of India (Sebi)’s told mutual funds to offer direct plans, these seem to be bearing fruits. Smart investors, especially corporations and high networth individuals, are lapping these up, as they come without any intermediation and associated costs. As direct plans grew at a significantly faster pace than the broader industry, investors made significant savings in commission payments.
Sebi had in January 2013 asked mutual funds to offer such plans in all schemes. There would not be any distribution fees or trail fees paid to agents for such schemes. Because of this, expense ratios would be lower than regular plans. In the year ending March 2016, equity assets under management (AUM) in the direct channel went up 42 per cent to Rs 55,384 crore from Rs 38,932 crore. Across all schemes including debt, AUM from the direct channel went up from Rs 4.08 lakh crore to Rs 5.20 lakh crore, an increase of 27 per cent. In comparison, overall AUM of the industry grew at a much slower pace of 13.8 per cent to Rs 12.32 lakh crore from Rs 10.82 lakh crore. This has had an impact on the amount investors paid distributors as commission, say experts.
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