NFOs Pricing

SEBI may ask MFs not to price NFOs at highest TER slab

The pricing of NFO should be based on average TER of all existing open-end schemes.

NFO may no longer be attractive for fund houses at least in terms of pricing.

SEBI has reportedly asked AMFI that NFOs should not be priced at highest TER slab rate. Instead, it should be priced in line with average TER of all existing open end schemes, said two MF officials aware of the development.

Currently, fund houses can charge maximum TER of 2.25% in equity funds and 2% in other than equity funds.

An MF official requesting anonymity said that the market regulator has impressed upon AMFI that NFO should be priced based on average TER of all schemes. For instance, if average TER of all open-ended equity schemes of a fund house is 2%, the NFO cannot be priced at TER more than 2%, he added.

Another official said that SEBI is likely to follow the total AUM of fund house to introduce the new slab for NFOs. This means, smaller fund house can price their NFO at higher price compared to larger fund house.