The Mutual funds regulator claims that they want to reduce the cost to the end investor. Great. So you should touch the costs of the manufacturer, instead it touches the costs of distribution.
Why the great regulator cannot come with a cost structure for “direct” investors. Whatever you want the cost to be…bring it there. Instead you keep creating amazingly complicated structures. So a big fund cannot pay more. Great, so if I have a big fund AND DON’T WANT TO GROW IT MORE, I can just reclassify into a category where it is DIFFICULT to sell – or impossible to sell. Obviously you should not do it so openly or blatantly. You should do it surreptitiously. Watch this space.
The only thing that seems to be happening is that the MF industry cannot understand what it is supposed to do. The conflict between the shareholder of the mutual fund, the unit holder, and the distributor – is something that the market should decide, not the regulator.
To quote the Fifa report, the purpose of reduction of costs was not meant to reduce the commission of the distributor. However the impact has been on the IFA. This just means that the IFA will vanish. Maybe by 2022 if not 2021. The benefits of economies of scale belong to the amc, not the IFA, so should the reduction of the commission be based on the aum of the scheme or on the aum of the distributor. Will it work? makes sense? to me it does not.
So what will the amc do? they will launch NFO – focused, specific funds – infra, medical, health, banking, nbfc, export oriented, sharia,…retirement, child plan, old age expense plan…..
Why would they do this? Simply because the ‘reward’ structure favors the small fund – and works against the large fund.
So we will see a huge line up of NFO….read this page…
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