Fund houses offer benefits to attract investors

Fund houses have started inducing distributors by offering them sops to attract customers after the August 1 deadline, when the entry load for investing in mutual funds will be abolished.

In the past few days, various senior officials from large fund houses have been meeting distributors and promising commissions of 2%-2.5% after August 1. A distributor, on condition of anonymity, said, "In the past few days, many fund houses have started assuring us commission of at least 2% after August 1. Mostly, all the major fund houses have promised us an upfront commission, while smaller ones are still trying to figure out the load structure."

Last month, Sebi had banned entry load from August 1 in all mutual fund schemes. The regulator also directed asset management companies to carry a suitable disclosure on the application forms that the upfront commission will be paid by investors directly to the distributors, based on his assessment of various factors including the service rendered by the distributor.

However, senior officials from a leading fund house said, "We are planning to give an commission of 2%, but not more than that, as it will finally impact our profitability in the long run." In June, assets under management stood at Rs 6,70,993.13 crore, a rise of 4.98% as compared to Rs 6,39,129.81 crore in the same month of the previous year.

Vikaas Sachdeva, country head (business development) at Bharti AXA Investment Managers said, "Nothing has been finalised yet on the load structure. We will be announcing it by early next week. Apart from that, we have to wait till September to witness some major chances of load structure of fund houses." Already, several distribution houses such as ICICI (ICICIBANK.NS : 850.9 -14.6) Direct have announced waiver of transaction fees for its high networth mutual fund customers. As per the new fee structure, there will be no commission for ICICI Direct customers with an investment of above Rs 8 lakh.