Sebi for routing back exit load into schemes

A of the Securities and Exchange Board of India (Sebi) on Tuesday recommended the — the fee charged on investors for selling their units before one year — be ploughed back into the scheme.

At present, the exit load goes to the profit and loss account of the fund house. As a result, the balance sheet gets a fillip when more people leave the scheme. On the other hand, the existing investors suffer because of the loss in corpus. By ploughing back the exit load into the scheme, the net asset value improves, benefitting unit holders.

The committee also considered measures such as increase in expense ratio — the percentage of an investor's corpus that's deducted by an asset management company annually to meet its various expenses — of equity schemes and the fungibility of its use to rejuvenate the struggling mutual fund industry.

To incentivise the fund houses, the committee actively discussed the proposal to raise the expense ratio by 25 basis points to 2.5 per cent, two persons familiar with the matter said. The committee also considered a move to allow fungibility of the expense ratio, which will help fund houses pay higher commission to distributors. No decision has been taken yet, the sources said.

The mutual fund industry is going through tough times as it has lost 1.5 million equity folios in the first six months of 2012, according to Sebi data. Prime Minister Manmohan Singh, who last month took charge of the finance ministry, had outlined resolution of problems in the industry as one of the priority areas.

In a meeting with top mutual fund executives and the industry body, Association of Mutual Funds in India, last week, the had showed its willingness to consider several steps including increasing the expense ratio.

However, smaller fund houses are not happy with the idea of raising the expense ratio, and say the proposal for a blanket increase is being pushed by the larger players.

Raising the expense ratio by 0.25 per cent is likely to put a Rs 450-crore annual burden on investors of equity schemes. The top-dozen fund houses are likely to benefit the most as they would corner 88 per cent of the proposed rise.

According to data provided by mutual fund tracker Value Research, these fund houses control Rs 1.63 lakh crore, or 90 per cent, of equity assets in the industry. As of June 30, equity assets of the 44 mutual funds in the sector were Rs 1.8 lakh crore.

If an increase in expense ratio is approved, the 32 weaker players, with equity assets of Rs 3,000 crore or less-all struggling to make ends meet and sitting on losses-will see their annual earnings increase by a combined Rs 50 crore. The bottom 10 players will earn just Rs 1.17 crore between them.

image
Business Standard
177 22
Business Standard

Sebi for routing back exit load into schemes

BS Reporter  |  Mumbai 



A of the Securities and Exchange Board of India (Sebi) on Tuesday recommended the — the fee charged on investors for selling their units before one year — be ploughed back into the scheme.

At present, the exit load goes to the profit and loss account of the fund house. As a result, the balance sheet gets a fillip when more people leave the scheme. On the other hand, the existing investors suffer because of the loss in corpus. By ploughing back the exit load into the scheme, the net asset value improves, benefitting unit holders.

The committee also considered measures such as increase in expense ratio — the percentage of an investor's corpus that's deducted by an asset management company annually to meet its various expenses — of equity schemes and the fungibility of its use to rejuvenate the struggling mutual fund industry.

To incentivise the fund houses, the committee actively discussed the proposal to raise the expense ratio by 25 basis points to 2.5 per cent, two persons familiar with the matter said. The committee also considered a move to allow fungibility of the expense ratio, which will help fund houses pay higher commission to distributors. No decision has been taken yet, the sources said.

The mutual fund industry is going through tough times as it has lost 1.5 million equity folios in the first six months of 2012, according to Sebi data. Prime Minister Manmohan Singh, who last month took charge of the finance ministry, had outlined resolution of problems in the industry as one of the priority areas.

In a meeting with top mutual fund executives and the industry body, Association of Mutual Funds in India, last week, the had showed its willingness to consider several steps including increasing the expense ratio.

However, smaller fund houses are not happy with the idea of raising the expense ratio, and say the proposal for a blanket increase is being pushed by the larger players.

Raising the expense ratio by 0.25 per cent is likely to put a Rs 450-crore annual burden on investors of equity schemes. The top-dozen fund houses are likely to benefit the most as they would corner 88 per cent of the proposed rise.

According to data provided by mutual fund tracker Value Research, these fund houses control Rs 1.63 lakh crore, or 90 per cent, of equity assets in the industry. As of June 30, equity assets of the 44 mutual funds in the sector were Rs 1.8 lakh crore.

If an increase in expense ratio is approved, the 32 weaker players, with equity assets of Rs 3,000 crore or less-all struggling to make ends meet and sitting on losses-will see their annual earnings increase by a combined Rs 50 crore. The bottom 10 players will earn just Rs 1.17 crore between them.

RECOMMENDED FOR YOU

Sebi for routing back exit load into schemes

A mutual fund advisory committee of the Securities and Exchange Board of India (Sebi) on Tuesday recommended the exit load — the fee charged on investors for selling their units before one year — be ploughed back into the scheme.

A of the Securities and Exchange Board of India (Sebi) on Tuesday recommended the — the fee charged on investors for selling their units before one year — be ploughed back into the scheme.

At present, the exit load goes to the profit and loss account of the fund house. As a result, the balance sheet gets a fillip when more people leave the scheme. On the other hand, the existing investors suffer because of the loss in corpus. By ploughing back the exit load into the scheme, the net asset value improves, benefitting unit holders.

The committee also considered measures such as increase in expense ratio — the percentage of an investor's corpus that's deducted by an asset management company annually to meet its various expenses — of equity schemes and the fungibility of its use to rejuvenate the struggling mutual fund industry.

To incentivise the fund houses, the committee actively discussed the proposal to raise the expense ratio by 25 basis points to 2.5 per cent, two persons familiar with the matter said. The committee also considered a move to allow fungibility of the expense ratio, which will help fund houses pay higher commission to distributors. No decision has been taken yet, the sources said.

The mutual fund industry is going through tough times as it has lost 1.5 million equity folios in the first six months of 2012, according to Sebi data. Prime Minister Manmohan Singh, who last month took charge of the finance ministry, had outlined resolution of problems in the industry as one of the priority areas.

In a meeting with top mutual fund executives and the industry body, Association of Mutual Funds in India, last week, the had showed its willingness to consider several steps including increasing the expense ratio.

However, smaller fund houses are not happy with the idea of raising the expense ratio, and say the proposal for a blanket increase is being pushed by the larger players.

Raising the expense ratio by 0.25 per cent is likely to put a Rs 450-crore annual burden on investors of equity schemes. The top-dozen fund houses are likely to benefit the most as they would corner 88 per cent of the proposed rise.

According to data provided by mutual fund tracker Value Research, these fund houses control Rs 1.63 lakh crore, or 90 per cent, of equity assets in the industry. As of June 30, equity assets of the 44 mutual funds in the sector were Rs 1.8 lakh crore.

If an increase in expense ratio is approved, the 32 weaker players, with equity assets of Rs 3,000 crore or less-all struggling to make ends meet and sitting on losses-will see their annual earnings increase by a combined Rs 50 crore. The bottom 10 players will earn just Rs 1.17 crore between them.

image
Business Standard
177 22

LIVE MARKET

BSE

  ( %)

NSE

  ( %)

More News

  • Gold rebounds on jewellers' buying, silver jumps Rs 280/kg Gold rebounds on jewellers' buying, silver jumps Rs 280/kg
  • Image via Shutterstock DII ownership in stocks at six-year high

STOCK WATCH

Company Price() Chg(%)
Trident 56.00 12.45
VST Inds. 2296.20 10.12
GRUH Finance 345.20 9.33
J B Chem & Pharm 336.60 7.90
Century Textiles 709.85 5.92
> More on BSE Gainers
Company Price() Chg(%)
Trident 56.45 13.13
Future Lifestyle 137.65 10.92
GRUH Finance 346.05 9.46
VST Inds. 2284.90 9.22
J B Chem & Pharm 336.50 7.71
> More on NSE Gainers
Company Price() Chg(%)
Welspun India 49.70 -8.64
Shilpa Medicare 553.00 -7.82
Piramal Enterp. 1851.10 -5.41
Jaypee Infratec. 9.21 -4.76
Avanti Feeds 534.10 -4.20
> More on BSE Gainers
Company Price() Chg(%)
Welspun India 49.40 -8.60
Shilpa Medicare 551.70 -7.87
IDBI Bank 70.45 -6.38
Jaypee Infratec. 9.10 -5.70
Piramal Enterp. 1847.10 -5.48
> More on NSE Gainers
Widgets Magazine
Widgets Magazine
Widgets Magazine

Derivatives

Index
Instrument Type
Expiry Date
Option Type
Strike Price

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard