Shares of asset management companies tank up to 10% on SEBI's decision to slash charges levied by mutual funds

In a major overhaul of the fee structure that mutual funds charge from investors, SEBI on Tuesday decided to cap the total expenses for investment in such funds to 2.25%. New Delhi Shares of Asset Management Companies (AMCs) tumbled up to 10.3% on Wednesday after markets regulator SEBI decided to slash the charges levied by mutual funds from investors. The scrip of Reliance Nippon Life Asset Management dived 10.29% to hit its one-year low level of Rs 192.10 on BSE. Shares of HDFC AMC tumbled 9.29% to Rs 1,397 -- its 52-week low. Commenting on SEBI's announcement on significant changes to TER structure, JM Financial Institutional Securities in a report said "While the move is a positive step towards increasing reach and reducing costs for retail MF investors as also improving transparency, it has a negative impact on profitability for AMCs." In a major overhaul of the fee structure that mutual funds charge from investors, SEBI on Tuesday decided to cap the total expenses for investment in such funds to 2.25%. Mutual fund industry must adopt the full-trail model of commission in all schemes, SEBI Chairman Ajay Tyagi told reporters in Mumbai after the board meeting. A trail-fee model benefits distributors if their clients stay invested in schemes for a longer period. At present, mutual funds pay distributors upfront commission as high as 2% against the one% recommended by industry body Association of Mutual Funds in India (AMFI). SEBI board has cleared the proposal to cap the maximum total expense ratio (TER) -- the fee that mutual funds collect from investors every year to manage their money -- for closed ended equity schemes to 1.25% and other than equity schemes to 1%. The maximum TER for open-ended equity schemes will be 2.25%.