Let MFs compete for your business
In view of recent posts & comments about fixed maturity plans, mutual funds - and their expense ratios / loads - here’s an interesting post by Ajay Shah; which in turn points to this essay by Ashish Aggarwal. The point:
In 1999, the OASIS Committee set up by the Ministry of Social Justice and Empowerment had talked about numbers of 0.2 percent and below for the New Pension System (NPS), which could be obtained using an auction for procurement and using index funds. These numbers have been roundly criticised by mutual funds and insurance companies as being completely unrealistic and lacking in common sense.
A remarkable recent development shows the possibilities for low cost fund management under Indian conditions. The Coal Mines Provident Fund Organisation (CMPFO) recently conducted an auction to pick fund managers for assets of Rs 20,000 crore ($4.6 billion). ICICI Securities and SBI quoted the lowest price of 0.01 per cent, in a competitive field containing HDFC Bank, UTI Bank, SBI Mutual Fund, IDBI Bank, IDBI Capital and Franklin Templeton. The CMPFO obtained a five-fold reduction in fees for fund management owing to this auction.
There is still hope for the retail Indian investor - who will be the John Bogle (Vanguard) of India?
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