I am an Indian Investor in Mutual Funds . I would be greatly obliged if you could spare some moments to bring me out of my confusion . I understand SEBI has instructed all Mutual Fund to stop charging the Initial Expenses which could be ammortized over a period of 3 - 5 years . Also they can not charge any Entry Load . Further it has put a cap on the Management Fees that a Mutual Fund can charge it's investor . (Kindly refer www.sebi.gov.in/acts/mfamendjuly29.pdf .) So , now , what exactly are the charges left that a Mutual Fund can charge to the Investor (both transparently and opaquely) . What exactly are the fees that a Distributor gets from the Mutual Fund currently (in various forms) ? Does he get any fees other than the "trail" of 0.75 - 1 % p.a. ? Is the Mutual Fund able to charge any initial issue expenses to the Investor in any masked way ? Also in the current scenario , can the Distributor benefit , in any way ,by encouraging the investor (his client) to keep churning his Portfolio frequently ?
19 December 2010
Despite all such caps put in by SEBI, the AMC definitely gets charges. The entry load has been done away with but now most MF schems have exit load upto a certain period. There are mgt fees and other charges.
The distributors gets some upfront fees from the AMC which is now meagre. The churning of portfolios is no longer benefitial to the distributor.
CAclubindia
