Updated: September 19, 2018, 2:15 PM IST
SEBI's decision-SEBI has set the maximum expenditure on investing in mutual funds, ie maximum limit expense ratio (TER). Now, TER for fund house with assets exceeding 50 thousand crore has been reduced from 1.75 to 1.05 percent. is. (Read also – Buytimes will be available from next month, these schemes, which will give more profits than banks)
Why change rule- According to Sebi Chairman Ajay Tyagi, the mutual fund industry is growing rapidly, but investors are not able to get the full benefit of this. According to the calculation they have done, reducing the TER will save about 1500 crore rupees on the revenues of 13,000 crores to investors. At the same time, this could reduce the profits of fund houses by up to 12 per cent.
What happens is TER-This is the fee that the fund houses charge every year to manage the money of investors. (Read also – these are the money launderers in these 3 mutual funds, you also have the opportunity)People who invest in mutual funds will benefit Experts say that TER has been reduced, which means that the cost of investors will be lower. This will increase their return (profits). Also, capping will increase transparency in the mutual fund industry.
Disadvantages to Distributors-SEBI has blocked advance commissions which fund distributors get investors to invest in the fund. This was very high at close-ended equity schemes many times. In some places there was advance commission of 1.25 percent. So in the few places the distributors used to take the Trail Commission only. But they will only get trail commission which will be around 1 per cent.