Investors will find it cheaper to invest in mutual fund schemes soon. Market regulator Securities and Exchange Board of India (Sebi) has decided to bring down costs associated with mutual fund investments by doing away with the initial issue fees for close-ended schemes.“The decision of removing initial issue expense will make close-ended mutual fund schemes less expensive for retail investors,” Sebi chairman M Damodaran said after the board meeting. Entry load is levied by a mutual fund when an investor invests in a scheme. Open-ended mutual fund schemes charge between 2- 2.5 per cent of the amount invested as entry load to meet their marketing costs and distribution commissions. On the other hand, close-ended schemes were permitted to charge up to 6 per cent as initial issue expenses that are amortised over the life of the scheme.According to Sebi, henceforth, all mutual fund schemes should meet the sales, marketing and other such expenses connected with sales and distribution of schemes from the entry load. “Consequently, waiver of load for direct applicants will also be available in close-ended schemes. This would bring in more transparency and better upfront disclosures to the investors in terms of the expenses charged in close-ended schemes,” Damodaran said.Sebi had recently decided to scrap the entry load on open-ended mutual fund schemes. “The move was part of Sebi’s initiatives to reduce the cost to investors looking to invest in mutual fund schemes,” said a fund manager. The total assets under management of mutual funds were Rs 549,942 crore as on december 31, 2007.New closed-ended entry •Sebi plans to scrap entry load on close-ended schemes• Open-ended MF schemes charge between 2- 2.5% of the amount invested as entry load • Close-ended schemes charge up to 6%
