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Six charts that influenced SEBI’s mutual fund total expense ratio proposals

After studying India’s Rs 40 lakh crore mutual funds sector, SEBI has unearthed data on performance, churn, and brokerage paid to justify some radical proposals to reimagine the total charges collected from investors. Moneycontrol takes a closer look at what the numbers revealed.

May 27, 2023 / 18:04 IST
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Sebi observed a large-scale reversal of trades in the illiquid stock options segment of BSE, leading to the creation of artificial volumes on the bourse.
Sebi observed a large-scale reversal of trades in the illiquid stock options segment of BSE, leading to the creation of artificial volumes on the bourse.

In what might be the biggest overhaul of the expense ratios that mutual funds have charged investors since 2018, the capital market regulator came out with a detailed set of fresh proposals on May 18.

The proposals of the Securities and Exchange Board of India (SEBI) aim, broadly, to make the total expense ratio (TER) more transparent and true-to-label (what you pay is what you get), bring about economies of scale (for retail investors, just as funds have brought it about for large investors through debt funds), bring in new investors, and discourage distributors and fund houses from churning investors from one scheme to another.

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Every proposal in the 40-page consultation paper is backed by research and findings from a study that SEBI initiated in December 2022. Here are the big numbers behind SEBI’s proposals that could make mutual funds cheaper and more transparent for investors.

Has the expense ratio narrowed over the years? Only for a few