MF Update: SEBI asks AMFI to promote low-cost direct plans

The direct plans are already a big hit with the HNIs (high networth investors) and institutional investors since their inception. Moreover, with an increased investment from small-town investors, the direct plans are emerging as the favourite choice for investment in mutual funds.

In order to increase the awareness about low-cost direct plan, the market regulator, that is, Security Exchange Board Of India (SEBI) has asked Association of Mutual Funds in India (AMFI) to promote direct plans as part of its awareness program. Direct plans help investors to bypass distributor and save on commission. Owing to this, these funds enjoy lower expense ratio up to 80 to 100bps and higher NAVs than that of its regular plan peers.

As per the latest AUM data dated May 2018 by AMFI, around 41 per cent of the assets of the mutual fund industry was from the direct plans. Moreover, the market regulator is aiming to increase this in the coming years. Overall, the AUM of the mutual fund industry has grown from Rs. 19 lakh crore in May 2017 to 22.6 lakh crore in May 2018, which represents an increase of more than 19 per cent on a year on year basis.