NFO—RGESS Mutual Fund Schemes
MAS Team | 24 October 2012
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With mutual funds also being allowed to launch schemes that would qualify as a Rajiv Gandhi Equity Savings Scheme (RGESS), fund houses would not want to miss this opportunity to capitalise on new investors. Hence, many of them are coming out with New Fund Offers (NFOs) of schemes that would invest in eligible securities as per the RGESS, 2012. Unfortunately for new investors, these schemes would have an expense ratio that could go up to as high as 3% per annum.
The new RGESS schemes would invest over 90% of their portfolio in equity instruments (mainly companies present on the BSE 100 index or the CNX 100 index) that are specified as eligible securities under the RGESS and would have a term of three years. The schemes are similar to ELSS; however, to claim the tax benefit of investing in the schemes under RGESS, investors should meet the requirements of “new retail investor.”
However, for schemes investing in companies present on the BSE 100 index or the CNX 100 index, charging a high expense ratio is not justified and is definitely not beneficial for the investor. If the fund manager invests in a predefined list of stocks it would be similar to passive investing. As index funds have been capped at 1.50% (excluding the additional expense ratio as per the new SEBI regulations), in the same way the expense ratio of RGESS schemes should have been capped as well. The fund manager would have to perform well to justify the high expense ratio charged. If not, over the long run an investor investing in a low-cost index scheme would earn a better return compared to an RGESS scheme. ETFs introduced under RGESS would work out to be a better option due to the lower expense ratio (around 1.5% for ETFs). It would be interesting to see if fund houses would launch schemes at a lower expense ratio to attract investors.
DSP BlackRock RGESS Fund, SBI RGESS Tax Saving Fund and IDBI Rajiv Gandhi Equity Saving Scheme are the three new schemes that are planned to be launched. To know more about the details of the scheme click here
To know the smart ways to save tax click here
Dear Investor,
In case of any grievance / complaint :
In case of any grievance / complaint :
- Please contact Compliance Officer Pankaj Raheja at [email protected] and Phone No. - 91-22-35131664.
- You may also approach CEO Debashis Basu at email- id [email protected] and Phone No. - 91-22-35131664.
