MF Update: SEBI lowers additional expenses for mutual funds

The markets regulator SEBI has slashed the 'additional expense' charged by mutual funds. The additional expenses have been lowered to just 5 basis points, eyeing a further increase in penetration of mutual fund products among investors.

Security Exchange Board of India (SEBI) move is expected to reduce the cost of investing in MFs. Industry players believe that it may result in lower commissions for distributors.

As per the notification on May 29, 2018, SEBI has lowered the additional expenses from 20 basis points to 5 basis points across all MF schemes. A basis point is hundredth part of a percentage point. Back in 2012, SEBI has allowed the mutual funds to collect 20 basis points as the additional expenses in lieu of the exit loads.

Apart from this, Sebi has also amended a regulatory framework for mutual funds to enable better disclosures related to MFs in an investor-friendly electronic form. Under this, the fund houses/AMC’s are expected to disclose the total expenses charged to all the mutual fund schemes separately under the separate head on their websites. As well as the NAV details will be made available on the individual websites and at the official website of AMFI (Association of mutual funds India). The move typically aims to enhance the transparency in the system.

Currently, there are 42 mutual fund houses managing assets to the tune of over Rs. 23.21 lakh crore as per the data made available by AMFI for the month of April 2018.