Listed AMCs preserve margins despite overhaul of expense ratio framework

Asset managers say lower investor fees under the revised expense ratio regime were offset by commission recalibration, helping preserve margins in the June quarter

Asset management companies (AMCs) have managed to keep their margins intact despite the rollout of a revised expense ratio framework that lowered the maximum fees they can charge investors. Listed fund houses, in their post-earnings calls, said they managed to offset the impact by recalibrating distributor commissions.

 

"There is no negative impact on account of changes in the total expense ratio (TER) regulations," ICICI Prudential AMC said, while highlighting that its margins on an annualised basis stood at 66 basis points (bps) for equity and 32 bps for debt in the first quarter of financial year 2026-27 (Q1FY27).

 

The revised expense ratio regime, which came into force on April 1, replaced the TER framework with the base expense ratio (BER). It also removed the additional 5 bps expense that AMCs could earlier charge under the TER regime, while requiring certain costs such as brokerage, transaction expenses, and statutory levies to be disclosed separately. The changes were expected to hurt yields of mutual funds (MFs).

 

AMCs said they managed to shield their margins by passing on the impact to intermediaries.

 

"Our approach has been to offset this through optimisation of commission structures, along with prudent management of both direct and indirect costs. So, what I can say is we have been able to maintain our margins," said Navneet Munot, managing director and chief executive officer (MD & CEO) of HDFC AMC.

 

Nippon Life India AMC, Aditya Birla Sun Life AMC, and UTI AMC also said the regulatory changes had no material impact on their margins.

 

"Equity yield is at 54 bps excluding arbitrage, debt is 25 bps, liquid is 12 bps, and ETF (exchange-traded fund) as a category is 25 bps. Overall, our yield remained constant at 38 bps quarter-on-quarter (Q-o-Q). As far as the passthrough of the TER changes is concerned, we have mostly passed on everything to the distributors through the commission alignment, and there is no impact on the financials," Nippon Life AMC said in the Q1 post-earnings call.

 

While the AMCs reported stable yields, their Q1 performance varied due to multiple factors. ICICI Prudential AMC reported a 23 per cent year-on-year (Y-o-Y) increase in profit after tax (PAT) to ₹965 crore, while HDFC AMC and Aditya Birla Sun Life AMC posted a 12 per cent rise each. Nippon Life India AMC's PAT grew 27 per cent to ₹503.1 crore. Canara Robeco AMC reported a 24 per cent increase in PAT to ₹75.6 crore.