Mutual Funds Investments to Become Expensive for Existing Investors, Those Living in Metros

Investing in mutual funds is likely to become expensive for the existing investors and those residing in metros or top cities in India. Market regulator SEBI (Securities and Exchange Board of India) has allowed AMCs (Asset management Companies) of top-15 Indian cities to charge extra 30 bps expense ratio for managing funds. This results in increase of expense ratio 30bps to 2.25% in case of funds with assets over Rs 100 crore.

Expense ratio is the fee charged by a fund house to manage the fund. The charges for managing and operating the fund include management fees, administrative fee and operating costs. Currently, mutual funds are allowed to accept 2.25% as expense ratio. Of these, 1.25% has to be mandatorily allocated to meet recurring expenses.

Apart from these measures, the market regulator has decided to simplify the registration process by distributors, reduce fees for NISM and AMFI registration. Moreover, SEBI decided to create an investor education fund pool from asset management fees.

SEBI in its statement noted that, in case of mutual funds, service tax payable on investment management fees should be charged to the scheme and decided that any service tax would be charged to the ultimate investor and not to the Asset Management Company (AMC) as is the practice at present.