![]() Finally, the charges cannot be greater than 1.05 percent for AUM more than Rs.There is a 0.5 percent decrease in expense ratio for every increase of Rs.The charges can be up to 1.6 percent if the AUM is between 2000-5000 crores and 1.5 percent if the AUM is between 5000-10000 crores.For AUM between 7 crores, the charges are capped at 1.75 percent.If AUM is between 500 – 700 crores, 2 percent can be charged.If the AUM is under Rs 500 crores, the fund house can charge 2.25 percent.They have put in various slabs based on AUM (Assets Under Management) for all open-ended equity-oriented mutual funds. What is the ceiling limit set by SEBI for the Expense ratio?Ĭapital markets regulator SEBI (Securities Exchange Board of India) has ceiling limits for the expense ratio in mutual fund schemes. So it is clear that the low expense ratio increases the investors’ overall returns and the higher expense ratio decreases the returns in the investors’ hands. In other words, the expense ratio is deducted directly from the returns generated by the fund. If the same mutual fund scheme earns a return of 12 percent, then the effective return in the hands of the investor comes to 10.5 percent. 10000, then the investor needs to pay Rs-150 to the fund house for managing the scheme. So if the expense ratio of a mutual fund scheme is 1.5 percent and an individual invests Rs. ![]() The expense ratio is the amount that the fund house or the AMC charges from unitholders expressed in percentage terms. The expense ratio directly affects the returns earned by the fund house. How does the expense ratio impact mutual fund returns? Thus, the expense ratio becomes a crucial element when deciding about the mutual fund scheme for investment. These costs are taken into account while calculating NAV (Net Asset Value) and are recovered through unitholders. The expense ratio is per unit cost of managing the fund. These expenses form part of the expense ratio. It also incurs costs relating to commissions, allocation charges, registration and transfer, legal fee, audit fee, custodian, etc. A fund house or an AMC (Asset Management Company) employs fund managers and a management team that tracks the markets and makes investments in different schemes. The fund house incurs some expenses in managing their funds. What is the expense ratio in mutual funds? It is merely the percentage of the fee charged by the fund house from investors as the maintenance fee. This management cost is also called the expense ratio. One of these factors, also a crucial one, is the fund house’s management cost or the AMC. ![]() The factors include the fund house, past performance of the scheme, expertise, and experience of the fund manager, etc. There are many factors which investors look at while comparing and investing in different mutual funds schemes. ![]()
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