How India’s MF ecosystem has evolved since the 90s

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₹46 trillion. Addressing a conference of chartered financial analysts some time ago, Kumar said the high demand for Master Gain 92 fund was due to the logistical difficulty faced by small investors in buying and selling shares through stock brokers. For them, the easiest way to participate in the markets was by owning mutual fund units, thereby giving them an indirect exposure to equities.

At that time, the Harshad Mehta bull run was on in full swing and even ordinary people wanted to participate in the stock markets at any cost. All that changed soon. Market regulator Securities and Exchange Board of India (Sebi) introduced various measures to streamline and make mutual funds more accessible.

The advent of technology speeded up the process. Mint spoke to some industry veterans to understand how the MF ecosystem has evolved since the 90s. MF distributors were then called Independent Financial Advisers (IFAs) and could earn heavy commissions in the form of annual charges, entry load, exit load and initial issue expenses.

The last was levied during the launch of a new fund— an initial public offering as it was known then. Now, it is a new fund offering. Asset management companies (AMCs) could charge an initial issue expense of up to 6%.

This would take care of their expenses and the commissions as well. The entry and exit load commissions could both be as high as 7% and distributors got a part of this as well. To be sure, an entry load is charged when an investor buys a fund and an exit load is charged when an investor sells it.

Gradually, Sebi started working towards dismantling this commission structure. The initial issue expense was removed in 2008. Subsequently, the entry load was abolished in 2009 and it could no