CII report makes case for removing cap on MF expenses

MUMBAI: The CII and PricewaterhouseCooper report on the mutual fund industry has said that a cap on expenses on mutual fund schemes could be done away with and the industry allowed a free play.

The report released at the 'Mutual Fund Summit 2008' organised by the CII here on Wednesday, said current SEBI regulations have capped the maximum amount of expenses that can be charged to a scheme.

"But as we move away from a maturing industry to a matured industry, there is a case for reconsideration of such a cap on expenses," the report said.

Responding to apprehensions that freeing of such a cap would tempt the industry to load more expenses on the schemes, the report pointed out the free market principle would ensure that the industry would not charge more than the required expenses.

The report pointed out that similar investment products sold by insurance companies do not have such limits on expenses.

"Charging additional expenses would enable the fund houses to invest more on expanding the investor network and improvise on delivering quality services to investors. Any temptation to charge additional expenses would be a deterrent as it would impact performance of the scheme," the report said.

Such a cap is not there in developed markets, the report added.