Even after the implementation of several investor-friendly measures in recent years, India is one of the most expensive countries in the world in terms of fees levied on equity and hybrid mutual funds.
According to a study conducted by MorningstarInc., the country’s asset-weighted median spending ratio for equity mutual funds is 1.93%, which is higher than the study of all 26 countries except Canada,Italy and Taiwan. India’s rate for hybrid funds is 1.78%, which is more expensive than in Germany and Canada.
Overall, India’s fee and expenditure grades were better than the average below the average in 2017, when Morningstar conducted its final survey. The report says the upgrade is the country’s move to ban front-commission and cap investment charges.
“Still small fund market relative to many others, India’s fund industry has seen a sharp growth in assets,” Morningstar said. This increase requires the country’s market regulator to “scale back to investors through running
Retail investors have a force behind the growing strength of mutual funds since Prime Minister Narendra Modi came to power in 2014. The number of accounts of individual investors has doubled to 84million, while industry assets have tripled from $370 billion,data from the Association of Mutual Fund in India show.
So why is the average cost of equity and hybrid mutual funds still the highest in the world?
Morningstar said the reason is that most individual investors in the country still look for the services of mutual fund distributors and opt for “commission embedded” schemes that add to costs. The information provider said exchange-traded funds still represent a small portion of India’s fund industry.
“MostIndian investors prefer active management, which looks at the relative success of active managers versus passive investments in cashing inanities in developing Indian investment markets,” the report says. “