Ch.7 · Total Expense Ratio Limits · hard
What is the 'incentive TER' or performance fee concept in mutual funds?
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EXPLANATION
Performance-based or variable fees (where AMC earns more if the fund outperforms) are NOT permitted for regular SEBI-registered mutual fund schemes. India follows a flat TER model. Performance fees create potential conflicts — AMC may take excessive risk to earn higher fees. Only Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) are permitted to charge performance fees.
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