Sahara Mutual Fund launched a new scheme with a performance-linked variable fee structure. The Sahara Wealth Plus fund is an open-ended growth scheme which will invest primarily in equities.
"Through the variable fee structure, the AMC will charge a fee to the investor only when the Wealth Plus fund performs" said Rajiv Shastri, CEO of Sahara mutual fund in a press conference, where it also unveiled a new corporate logo. Sahara entered the mutual fund business last year after acquiring the assets of erstwhile First India AMC.
The fund will charge 1.5 per cent of daily net assets for meeting third-party expenses. The additional 1 per cent management fee permissible under Sebi guidelines, will be the variable component pegged to the performance of the scheme.
Essentially, the AMC fee earned depends on the scheme's daily performance. The two conditions considered for charging investment management and advisory fee are that net portfolio return (NPR) should be greater than zero and than the benchmark return (BR), BSE 500 index in this case.
If NPR is less than BR and zero, the management will be zero; if NPR is greater than either BR or zero, the management fees will be half of the maximum permissible and if NPR is greater than both BR and zero, management fees will be the maximum permissible.
Sahara Wealth Plus, which will open for subscription on July 4, 2005, proposes to invest in companies based on their return on equity.
"The Wealth Plus fund will identify companies for investment whose three year average RoE is at least twice the annualised yield for 5-year government of India (GoI) security as on March 31, 2005," said Naresh Kumar Garg, chief investment officer, Sahara mutual fund.
High management fees charged by mutual funds have been a major issue in the US, especially since most actively managed funds have been underperforming consistently.
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