India's market regulator is planning to permit a new category of mutual fund schemes where asset managers' charges will partly be linked to performance, according to an official document reviewed by Reuters and a source directly familiar with the matter.
As part of the proposal, the Securities and Exchange Board of India wants to allow additional charges if a fund consistently outperforms a relevant benchmark index and gives higher annualised returns, according to an internal SEBI document.
"The regulator is considering this proposal since it has observed that many actively managed funds fail to beat their benchmark index," said a person with direct knowledge of the matter, declining to be named since he was not authorised to speak to the media. The proposed changes are part of a comprehensive review of fees that India’s 39.46 trillion rupee asset management industry currently charges from its investors. There is a need for transparency on charges levied by mutual funds, SEBI chairperson Madhabi Puri Buch said on March 28.
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