Comments on: Mutual fund Expenses…

By: shinu

shinu — Wed, 25 Jul 2012 17:58:06 +0000

Sir

Why not they make money based on performance too. One best case study is that Reliance natural resources a NFO in 2007 is in the negetive after almost 5 years and eating the investors money and is still having 1600+ crores in its kitty while HDFC balanced which is giving a 10+ returns in not even managing 700crores…

By: subra

subra — Tue, 24 Jul 2012 16:57:27 +0000

so sorry I forgot the most important one – 0 load and 2.90 amc charges….let me assume it comes to about 12.9 crore.

the gap between 22.8 and 12.9 is what the Amc is taking from u for expenses and fees.

Is there somebody who is worried that the amc’s are not making money? do not worry. Worry for your own money esp in a fledglng situation is easy to understand

By: LuckyOye

LuckyOye — Tue, 24 Jul 2012 13:00:33 +0000

Answers to the Quiz (to bailout the n00bs among us):
(All approximate amounts with IRR 10%)
Load 0%, FMC 0%: 22.8 Cr
Load 0%, FMC 2%: 15.00 Cr
Load 2%, FMC 2.5%: 13.3 Cr
Load 2%, FMC 2.9%: 12.3 Cr

the party’s just starting for the AMCs and the distributors

By: shinu

shinu — Tue, 24 Jul 2012 11:48:37 +0000

Wish the regulator had linked a portion (say 25%) of the charges with the funds performance vs its benchmark ATLEAST…

Let the fittest and strogest only survive and make money too. Good atleast that the entry load is not brought back.

So long as governance is bad, economy will suffer
so long as economy is bad, market will suffer
so long as market is bad, investor will suffer
so long as investor suffer, nobody will invest/ no capital flows and MF industry SHOULD suffer too.
Rest anologies sab bakwaas hai… just to drive out the already shrunk faithfuls of indian story…

By: MH

MH — Tue, 24 Jul 2012 08:41:53 +0000

With these high expenses in place, the investor wouldn’t be left with much low expense indirect equity options. Even the Index Funds run with high expense ratio here.

By: subra

subra — Tue, 24 Jul 2012 05:36:33 +0000

Mahesh – why are u blaming the regulator? he has only fixed the upper ceiling. In the share brokerage business the upper limit is 2.5% – the actual charge that I pay is .05% for delivery.

if more and more people choose funds sensibly amc charges will come down. It is not rocket science that a fund house which charges less will attract more money…and therefore have more aum. More aum will let them charge lesser..so the virtuous cycle can continue.

However unlike term insurance a competent fund manager can work like magic ….so the decision is tough.

By: Sambaran

Sambaran — Tue, 24 Jul 2012 05:29:10 +0000

Thanks Subra for your response. So it is true that only the upper limit of expense ratio has been raised to 2.75%. Fund house can choose to keep a low expense ratio. The customer (if aware) can choose to make a decision based on low-expense-ratio given everything else is same.

On a different note:
Assume the distributors/AMC need more money to survive. Regulator has two ways to extract the money from customer/investor. Either impose entry load or increase the expense-ratio-ceiling. Isn’t expense-ratio-ceiling-raise the lesser evil? Now at least the distributor will have no stake in brainwashing and churning the investor’s portfolio.

By: Mahesh

Mahesh — Tue, 24 Jul 2012 05:21:27 +0000

0.25% increase in AMC and I started Crying… Why the world is so twisted for the Underprivileged people (read Customer). Subra isr like you, me too thinking of this change for a couple of days now.
Evil evil regulators !

By: subra

subra — Tue, 24 Jul 2012 05:07:32 +0000

Unfortunately Sambaran in one of the ULIPs which I saw recently the low cost of the fund ws completely LOST by the pathetic fund manager that they have.

Largely it is true that ‘lower the cost, better the chances of a fund making money FOR THE INVESTOR over the long run’. However over a 4 year period, the answer may / may not be true.

Chasing a fund because its expenses are lower is far, far, far more sensible than chasing a hot fund, a fund manager, or the star rating.

By: Sambaran

Sambaran — Tue, 24 Jul 2012 05:00:59 +0000

All this is about the increase in expense ratio from 2.5% to 2.75%. Please confirm.
It is upto the AMC, whether how much expense ratio it wants to keep for a fund. AMC can chose to have a lower expense ratio. Please confirm.
As a customer, I can look at expense-ratio and make it a component of my decision about chosing the fund. Please confirm. (For e.g. I may chose Quantum over a higher expense-ratio fund, everything else being equal).

So isn’t an expense-ratio aware customer the solution to this new development?