What you pay for buying mutual funds and
what has changed from August 1, 2009

As you may be aware, the Securities Exchange Board of India (SEBI), in its new regulation with effect from August 1, 2009, has mandated changes in the Mutual Fund fee structure.

If you wish to read the exact SEBI circular on this, please do click here.

Alternatively, below is an attempt by us to explain this new fee structure in simple language.

Prior to this change, what all buyers of mutual fund schemes were paying the distributors, in industry jargon is called ‘entry load’. Typically this was 2.25% of the total amount taken from the amount you invested in most Equity based mutual fund schemes.

To illustrate this better by way of an example – Iet us say you invested Rs. 1,00,000 in an equity based mutual fund scheme. Out of this Rs. 1,00,000, an amount of Rs. 2,250 (i.e. 2.25%) was earmarked as sales commission to the distributor of the scheme. What this means is the amount that you invested is actually Rs. 97,750 (i.e. Rs. 1,00,000 minus Rs. 2,250).

We take great pleasure in sharing with you that with effect from August 1, 2009, your entire Rs. 1,00,000 has been invested in the mutual fund scheme that you had chosen. This would have immediately improved your return by 2.25% from this investment in the first year itself.

Now you would naturally be wondering how will the distributor get his revenue. The answer is that, in accordance with the new SEBI regulations, the distributor will now have to communicate to investors any upfront commission payable to distributors by the investor. Such fees will be based on investor assessment of various factors including services rendered by the distributor.

While each distributor will have his own charges that he has to mandatorily communicate to his customers, we at ICICIdirect.com are happy to offer you our services as per the structure shown below:

If the cumulative MF investment you have with us is Rs. 8 lakhs or more, you actually pay NOTHING.

The 'cumulative value' will be taken as per Value at Net Asset Value (NAV) of your entire MF holdings, at the time of order placement, as seen on your MF Unit Holdings page. Transaction charges will be applied as per the new fee structure, accordingly.

If you have any MF holdings which have not been done through us, you can transfer them to ICICIdirect.com without any extra charge, so that you can enjoy these benefits on the cumulative unit holdings. (Click here to know more about the Transfer in process).

To illustrate this with the help of some examples:

Further, as per the SEBI guidelines, all distributors will have to disclose the commission payouts that they get from the Asset Management Companies.

To know the scheme wise commission that we receive from the AMCs, please Click here.

We welcome the SEBI regulation in this and want to reassure you that we will not compromise on our services.

In fact, we have been working to improve our offering in Mutual Funds significantly, and are happy to report that with the new, enhanced service you will be able to:

As always, besides transparency, professionalism and full disclosure, you will continue to enjoy:

And like you always did, you can continue to avail all this online through ICICIdirect.com as well as offline through ICICIdirect-The Neighbourhood Financial Superstore in your vicinity, where you can interact with a trained and well informed Relationship Manager.

So make the most of it, today!

Disclaimer