Ch.6 · Distributor Commission Structure · medium
How does the TER limit work for mutual fund schemes as AUM increases?
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EXPLANATION
SEBI prescribes TER in a slab structure where the limit decreases as AUM grows. This ensures economies of scale benefit investors — larger funds must charge lower expense ratios. For example, an equity fund pays up to 2.25% for the first ₹500 crore but only 1.05% on AUM beyond a certain threshold.
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