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POSTED BY ON January 25, 2013 9:10 pm COMMENTS (5)
I realised the following while participating in another thread. Thought I will share this will you.
Quantum Long Term Equity (QTLE) has an expense ratio (ER) of 1.25
HDFC Top 200 Regualr plan (a similar but not identical fund) has a ER of 1.78
Acc. to HDFC HDFC Top 200 direct plan will have ER which is 0.59 lower
So HDFC Top 200 Direct plan has a ER of 1.19!
Similarly
HDFC Equity (again similar but not identical to QTLE) has a ER of 1.78
Acc. to HDFC HDFC Equity direct plan will have ER which is 0.65 lower!
So HDFC Equity Direct plan has a ER of 1.13!
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Dear FFC, your calculations are right. No doubt about it but my problem, these funds started these investor friendly steps only after being forced for by SEBI regulations. Not on their own. where as QLTEF, started with 1.5% & reduced to 1.25% on it’s own & I do believe as & when their asset size reaches to a more respectable level, the next round of cut in expense ratio ‘ll be there. By how much? My guess is as good as yours’.
Thanks
Ashal
of course everything is linked to asset size. This is why direct plans of top 200 and equity have lower expense ratio than QLTE.
Further cutoffs in an actively managed fund will be much smaller. After all some base expenses cannot be reduced.
Whether forced or intrinsic what is good for the investor is good for the investor.
Good to know we are seeing lower expense/high performance combo on proven schemes.
A lower expense ratio does matter for sure as we know. However the long term performance of the fund is equally important. One can still choose a scheme having an expense ratio 0.5% higher but if it beats a broad array of schemes by, say 2%, over longer duration it is a better bet
i think, the difference of expenses for existing plan and direct plan is only in respect of upfront and trailing commissions to advisers/agents/brokers, and not others. for other expenses , the total AUM of both existing and direct would be considered and divided in proportion of their AUM sizes. thus direct plan specie of any particular mutual fund would be better than the existing one. am i correct in my thinking?
The difference is only in the trail commissions. Upfront commissions are paid from the AMC fee which is the same for direct and regular plans. For direct plans AMCs will pocket a little more money.