The announcement of SEBI for mutual funds industry in October 2017 to standardize the scheme categories and defining them—is bound to spill over into 2018. The fund houses were asked to submit their plans for this change, by 15 December 2017. After Sebi examines and approves these plans, fund houses will set in motion the process of reclassifying their existing schemes, even merging some of them.
Fund houses will also have to be mindful of managing investor expectations, on the back of high returns that equity funds delivered in 2017. This is a task upon every fund house, said Nilesh Shah, managing director, Kotak Mahindra Asset Management Co. Ltd. However, the rising inflows will continue “not just from the beyond 15 towns, but also from towns beyond those,” said A. Balasubramanian, chief executive officer, Birla Sun Life Asset Management Co. Ltd.
“The big events of 2017 will result in consolidation in 2018. Scheme consolidation will result in the industry stabilizing, once all the schemes move to their new mandates. This would also trigger consistency of returns,” said Kalpen Parekh, president, DSP BlackRock Investment Managers Ltd. G. Mahalingam, whole-time member of Sebi, in his keynote address at the fourth edition of the annual Mint Mutual Fund Conclave held in Mumbai in October 2017, had said that the expenses should come down, going ahead. Incidentally, it has been 5 years since direct plans were introduced in all mutual fund schemes on 1 January 2013.
A look at all multi-cap equity funds shows that the average expense ratio in regular plans (which commission-earning distributors hawk) is 2.39%, as opposed to the average of 1.45% that direct plans charge, according to Value Research. Industry experts say Sebi is unlikely to bring down the total expense ratio. “But Sebi can push the industry further to follow the best practice guidelines by Amfi (Association of Mutual Funds of India),” said Balasubramanian.