Heard on the Street: Funds keen on different share classes for MFs, FIIs

In a bid to attract more foreign resident investors into mutual funds, the industry recently proposed to policy-makers to have different share classes— one for domestic funds and another for foreign investors, comprising different cost structures.

Mutual fund officials said although the back-end process has been finalised, there are no takers for the product as foreign investors would prefer to come in with a cheaper cost structures.

“The intention is to have another portfolio that would cater to foreign in vestors with different cost structure... this works on economies of scale,” said a senior fund official. At present, in equity, the cost structure for investors is 2.5%. Globally, mutual funds have a multiple-share class structure.

According to people familiar with the development, the demand is unlikely to be accepted by the securities market regulator as this could lead to discrimination, they said.