Recently, a new category was introduced by SEBI on asset managers’ charges to be linked with performance based fees on funds. In this scheme, an additional fund will be charged as per the mutual funds performance above a certain benchmark.
If the proposal gets approval then India shall stand among the few measure markets, which introduces performance-linked fees in mutual funds.
Furthermore, the regulator’s committee made this decision after carefully considering the incapacity of various actively managed mutual funds to beat their benchmark. They deemed it to be an incentive that can encourage intermediaries and yield better returns to these funds.
Now if the proposal is introduced the fundamental fees of asset managers would be reduced and an additional charge will be levied up based on the performance of the respective fund. SEBI has not publicly given any responses upon it.
The goal is to make a transparent and more operative management in the mutual funds industry. So, it is obviously looked upon that the investor is not charged for the multiple amounts for the same investments by different funds.
Upon considering all the issues, the SEBI can promulgate the notification of additional performance-based charges levied upon the total expense ratio (0-0.25%) which is currently operative. Now, if after the proposal pending at internal panels, a public feedback is granted, the SEBI can announce its absolute decision in implementing the rule.