Muted response to new fund offers of RGESS
While the fund houses expressed confidence that they would be able to garner the minimum required limit of R10 crore for their new schemes, sources said that going has been tough. All of these NFOs close this week.
Industry observers believe that each of the fund houses would be able to get not more than 10,000 retail applications as opposed to the earlier targets that were in the range of anywhere between 35,000 and 60,000.
The total collection is not expected to be more than R25 crore for each fund house. “We got a good response initially; then, the appetite tapered off. Many investors postponed their investment plans after the finance minister announced plans to liberalise the scheme,” said Nilesh Sathe, CEO, LIC Nomura MF. Sathe said his fund house was looking to collect about R15-20 crore under the new scheme.
Some fund houses like DSP BlackRock and HDFC MF are paying commissions as high as 6-7% to distributors, according to sources. Since fund houses can charge 2.7% as annual expense ratio, total charges that can be charged for three years amounts to 8.1%. Industry officials said that paying a commission of more than 4.5% is a bit unfair as that is the quantum of commission paid to distributors for ELSSs, which is also a tax-saving scheme with a