Need to think out of the box on fund expenses
Variable performance-based expenses is exists in certain customized products for high networth investor segment. This can be tried in a segment like funds, to make remuneration more equitable
For quite some time, we have been debating over direct versus distributor, lowering the cap on expenses, additional expenses for selling mutual funds to B30 locations (beyond the top 20 locations) and expenses for compensating exit load, among other issues. The ultimate variable for these exercises is the expense ratio that the asset management company (AMC) is allowed to charge, and the underlying theme is that lower the expenses charged, higher the return to the customer. However, what’s being missed out in the debate is the performance of the fund. When an investor enters a direct plan and the fund underperforms the peer group, she is left only with the psychological satisfaction of having paid a relatively lower charge to the AMC than the regular plan customer.