Shares of asset management companies tank up to 10% on SEBI's decision to slash charges levied by mutual funds

New Delhi: Shares of Asset Management Companies (AMCs) tumbled up to 10.3 percent on Wednesday after markets regulator SEBI decided to slash the charges levied by mutual funds from investors.

The scrip of Reliance Nippon Life Asset Management dived 10.29 percent to hit its one-year low level of Rs 192.10 on BSE.

Shares of HDFC AMC tumbled 9.29 percent to Rs 1,397 -- its 52-week low.

Representational image. Reuters.

Representational image. Reuters.

Commenting on SEBI's announcement on significant changes to TER structure, JM Financial Institutional Securities in a report said: "While the move is a positive step towards increasing reach and reducing costs for retail MF investors as also improving transparency, it has a negative impact on profitability for AMCs."

In a major overhaul of the fee structure that mutual funds charge from investors, SEBI on Tuesday decided to cap the total expenses for investment in such funds to 2.25 percent.

Mutual fund industry must adopt the full-trail model of commission in all schemes, SEBI Chairman Ajay Tyagi told reporters in Mumbai after the board meeting.

A trail-fee model benefits distributors if their clients stay invested in schemes for a longer period.

At present, mutual funds pay distributors upfront commission as high as 2 percent against the one percent recommended by industry body Association of Mutual Funds in India (AMFI).

SEBI board has cleared the proposal to cap the maximum total expense ratio (TER) -- the fee that mutual funds collect from investors every year to manage their money -- for closed ended equity schemes to 1.25 percent and other than equity schemes to 1 percent.

The maximum TER for open-ended equity schemes will be 2.25 percent.


Updated Date: Sep 19, 2018 13:46 PM

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