Simplification of the fee structure is the latest in a series of decisions by the regulator to improve investor choice. Sebi has earlier pushed for reducing the number of schemes – another tactic to steer investments towards high intermediation costs. It has sought mergers of overlapping schemes and raised the bar on differentiation for new ones. Definitional clarity has improved over investment themes such as based on market capitalisation and asset allocation. Styles of fund managers like value or growth investing have also received taxonomic clarity. All of this is designed to provide investors uncoerced choice over their investments.
Assets managed by Indian MFs have grown five times in 10 years, and have doubled in the last five. Sebi is right in voicing concern that intermediation fees have not dropped in relation to the surge in funds flowing into the MF industry. The industry now offers a wide channel for reducing Indian households’ traditional preference for saving in relatively low-yielding physical assets. More gains await as MF penetration improves in tier-2 towns and beyond. Regulatory changes to improve investor access to securities will widen wealth creation.