The Securities and Exchange Board of India (Sebi) has asked mutual fund houses to give investors the option to cash out when the fund administration fee goes up as a result of new rules. Mutual funds charge investors a flat fee of 2.25 per cent on the average of daily or weekly net assets. Fund of Fund schemes,existing as on July 29,2010,should adopt either of the total expense structures laid out in Regulation 52(6)(a) and change the total expense structure after giving the unitholders an option to exit in accordance with Regulation 18(15A), Sebi said in a circular to the mutual funds. Sebi had,in a July 29 notification,said that the total expense,including management fees,charged from investors in a fund-of-fund scheme should not exceed 0.75 per cent of either the daily or weekly average net assets which would benefit the investor. Alternatively,it said that fund houses could cap the management expenses at 0.75 per cent and fix their own fee for administrative expenses,provided the total charge does not exceed 2.5 per cent of the daily or weekly average net assets. In the case of an index fund scheme or exchange traded fund,Sebi wanted that the total fee charged from an investor,including the investment and advisory expenses,does not exceed 1.5 per cent of the weekly average net assets. Fund-of-fund schemes are those where a mutual fund invests in a scheme of another MF.
