MF distributors sweat as direct plan deadline nears

Nov 27 2012, 10:56 IST
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SummaryWith the deadline drawing near for implementing direct plans, mutual fund distributors are a worried lot as they believe that a host of institutional clients might switch over to these plans.

lot of HNIs will migrate to the direct plans, said K Ramesh Bhat, president, IFA Galaxy, an independent body of financial advisors. We have been talking to a lot of fund houses and they say the difference would be somewhere between 30 bps and 50 bps.

AMCs have been asked to provide a separate plan for direct investments in existing as well as new schemes by January 1, 2013, as per the Sebi circular.

It further states that such a separate plan shall have a lower expense ratio, excluding distribution expenses and commission, and no commission shall be paid from such plans. The plan shall also have a separate NAV.

Winds of change

* Institutional investors can save about 40-50 basis points on commission if they choose to go direct

* Institutional investors invest more than 90% of money in liquid funds and ultra short-term debt funds

* HNIs will migrate to direct plans if difference in NAV between direct and normal plans more than 50 bps

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