New fund offers have just become costlier for MFs

Excerpts from Power Breakfast on CNBC-TV18 Watch the full show » Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

If you're looking for new fund offers, chances are they will be few and far between. That's because Sebi has raised the filing fee for new offers by 400%, reports CNBC-TV18.

 

Sebi has increased its filing fee by 400%. Mutual funds must now cough up at least one lakh rupees or 0.03% of the amount a new offer raises, whichever is higher. Previously Sebi was charging funds Rs 25,000 as filing fees.

 

Experts say this will particularly hit Fixed Maturity Plans, which have spun good money for the industry in recent times. Suppose a Fixed Maturity Plan raises Rs 250 crore, it will now have to pay Rs 7.5 lakh as filing fees. This fee must be paid upfront. Of course, it will be passed on to investors.

 

A new fund may charge upto 6% of the amount it raises as expenses, which includes commissions and marketing expenses. Fixed Maturity Plans and cash funds generally tend to maintain low expense ratios. In the past four months, 51 fixed maturity plans have raised over Rs 14,000 crore. Fund houses say the increase will have a marginal impact on fund expenses but it may stem the flow of fixed maturity plans. 

 

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