Equity mutual funds would become cheaper starting Monday, 1 February, on the back of the Securities and Exchange Board of India (SEBI) announcing a cap on the total expense ratio (TER) at 2.25 percent in late 2018, The Economic Times reported.
This will especially impact equity schemes having bigger assets under management, while the smaller schemes will have a "much lesser" impact.
“Mutual fund investors will have the benefit of lower expenses. SEBI has pushed economies of scale for the benefit of investors.”Nilesh Shah, Managing Director
The reduction in the TER for funds with assets under management (AUM) of Rs 50,000 crore is expected to be as much as a negative of 0.42 percent, while for funds with AUM of 1,000 crore, there would be an increase of 0.01 percent, the ET report further pointed out.
In simple terms, Total Expense Ratio is the cost charged by mutual fund companies to the investors for management of schemes, with costs such as management fee, distributors' commission, registrar's fee, trustee fee and marketing expenses falling under its ambit, as this report points out.
TER is calculated in terms of the percentage of assets under management.
(With inputs from The Economic Times and The Hindu BusinessLine.)
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