The Capital market regulator SEBI has introduced a direct plan in alternative investment funds to provide flexibility for investors, bring transparency in expenses and curb mis-selling.
Starting in May, all schemes of AIFs shall have an option of a Direct Plan which will not charge any distribution or placement fee.
Moreover, AIFs have to ensure that investors who approach them through a SEBI registered intermediary should be on-boarded only on Direct Plan if the intermediary charges a separate advisory and portfolio management fee, said SEBI in a circular issued on Tuesday.
Category III AIFs shall charge distribution and placement fees, if any, to investors only on an equal trail basis and no upfront fee will be charged to investors, it said.
Further, any fee paid has to be charged only from the management fee received by the managers of such Category III AIFs, SEBI added.
Category I and II AIFs may pay up to one-third of the total distribution and placement fee to distributors upfront and the remaining has to be paid on an equal trail basis over the tenure of the fund, it added.
AIFs industry has asset under management of ₹7 lakh crore and the SEBI’s regulations will help build investors’ confidence over a period of time.
Anshu Kapoor, President & Head, Nuvama Asset Management said introduction of direct plans can result in a larger allocation from institutions and informed investors
SEBI should allow asset managers more flexibility in marketing, promoting AIF schemes and in creating tools for investors to discover, research and evaluate AIF products. Today, he said the ability to share information of AIFs in public domain is very limited.