SEBI caps MF expenses

The

equity market regulator, the Securities and Exchange Board of India, or Sebi, has brought down the cap on expense charged by asset management companies to give investors the benefit of economies of scale. The assets under management, or AUM, of mutual funds have grown manifold over the past two decades to

` 23.15 lakh crore but the expense ratio rate hasn’t been revised since 1996. Now, the maximum total expense ratio an equity fund can charge investors is 2.25 per cent for the first ` 500 crore of AUM. As the AUM grows further, the expense ratio will come down; it will be 1.05 per cent after the AUM crosses ` 50,000 crore. For non-equity schemes, the expense ratio has been capped at 1 per cent, while for closed-ended funds, it has been capped at 1.25 per cent. Also, now, AMCs can’t give upfront commission to distributors from their own pockets.