Quantum MF not to hike expense ratio

In an investor-friendly gesture, Quantum Mutual Fund has decided not to hike the expense ratio of its eight schemes.

The decision comes in response to the action of the SEBI board that, as part of efforts to “re-energise the mutual fund industry” came out with a series of steps to increase reach of the mutual fund products that included increase in some of the fee charged by the fund houses.

While its flagship scheme Quantum Long Term Equity Fund, and Quantum Tax Savings Fund charge 1.25 per cent as their expense ratio, the other six funds charge less than that - ranging from 1 per cent to 0.25 per cent. Even the 1.25 per cent expense ratio collected ranks among the lowest in the industry. QMF has said that there would be no change in the fee charged under its 8 schemes and the existing fee structure would be maintained.

SEBI had, as part of its efforts to rev up the MF sector, on September 13 tweaked the charges the funds could collect. SEBI said that with a view to “improving the geographical reach of mutual funds and, bring in long term money from smaller towns”, AMCs were allowed to charge additional Total Expense Ratio (TER) up to 30 bps, if the new inflows from these cities/ towns constituted a minimum 30 per cent of the total inflows. If the inflows were less, a proportionate amount might be charged as additional TER. 

Moreover, to encourage long-term holding of units by the investors and to reduce churn and “align the interests of the AMCs/ distributors with that of the investors”, SEBI decided that the entire exit loads would be credited to the scheme while the AMCs would be able to charge an additional TER to the extent of 20 bps. 

Besides, the burden of 12.36 per cent of investment fee (service tax) was to be borne by the investors.

QMF has, in a press release issued at Mumbai today, said that it had decided not to opt for any increase in the charges and hence there would be no increase in expense ratios. This included the service tax component that is included in the expense ratio charged. 

(Equity mutual funds are permitted to charge up to a maximum of 2.5 per cent on the net asset as expense ratio for running a MF scheme. A maximum of 1.25 per cent could be charged as fund management fee and the balance to meet other expenses like marketing, distribution etc. These sub limits have been removed giving the AMCs the freedom to allocate the 2.5 per cent as they wished under various heads. For other types of funds like debt funds, fund of funds etc the cap on expenses is less. The other expenses allowed by SEBI according to its September 13 decision were in addition to these expenses).

The QMF had assets under management (AUM) of Rs 248.57 crore (including Fund of Fund) as at the end of Sept 30, 2012, according to the fund web site.