KATHMANDU, APR 03, 2013
Companies managing mutual funds have found brokerage fees to be exorbitant.
According to the prospectus of Nabil Balanced Fund I, the mutual fund is expected to pay Rs 17.2 million in five years to brokerage firms as commissions for the transactions conducted. The sum is equivalent to 2.3 per cent of the fund’s initial size of Rs 750 million.
“Brokerage commissions need to be slashed for mutual fund transactions because the funds will be conducting transactions in large volumes every day,” said chief executive of Nabil Investment Banking Ltd — fund manager for recently launched Nabil Balanced Fund I — Pravin Raman Parajuli.
At present, brokerage fee is distinguished in terms of kinds of securities that are traded and trading volume. According to regulations, for share trading, brokers can charge one per cent to 0.7 per cent of the amount traded as brokerage fee based on the volume.
Likewise, for trading of bonds and debentures, brokers can charge between 0.2 per cent and 0.05 per cent as commission. Brokers can charge between 0.75 per cent and 0.40 per cent for instruments such as preference shares and mutual fund units. The larger the volume, the smaller is the commission for brokers.
“The broker fee looks small but since we conduct large transactions these commissions become pretty huge,” pointed out Parajuli, adding that the stock exchange can provide a separate platform for the mutual fund to undertake transactions.
“Regulators can provide mutual funds a separate window that does not require going through brokers to place orders so that transactions become swifter and cost less,” he said.
Mutual funds are subjected to higher frictional expenses — the overhead expenses incurred in brokerage commissions, and capital gain tax along with management fees.
At present, there is only one mutual fund listed at Nepse — Siddhartha Investment Growth Fund I — which has been actively trading stocks since January. Likewise, Nabil Balanced Fund I will become functional in two months. NMB Capital is also preparing to launch its mutual fund scheme while Siddhartha Capital is preparing to launch another scheme soon.
“Brokerage commissions are one of the biggest expenses for us. It will be better if the regulator and stock exchange can provide a separate window of trading for mutual funds,” said CEO of Siddhartha Capital Dhurba Timilsina.
Capital market regulator — Securities Board of Nepal (Sebon) — does not agree with providing a separate trading window for mutual funds that bypasses brokers. “The brokerage fee fixed is the maximum allowable charge. Since mutual funds undertake large number of transactions they can ask brokers to give them brokerage service at a discounted rate,” said chairman of Sebon Baburam Shrestha.
“Since mutual funds are managed by professionals, they can make deals with brokers at a competitive price and find the right balance between expenses and income,” he added. At present, there are 58 brokers at the stock exchange.
Source: THT
Companies managing mutual funds have found brokerage fees to be exorbitant.
According to the prospectus of Nabil Balanced Fund I, the mutual fund is expected to pay Rs 17.2 million in five years to brokerage firms as commissions for the transactions conducted. The sum is equivalent to 2.3 per cent of the fund’s initial size of Rs 750 million.
“Brokerage commissions need to be slashed for mutual fund transactions because the funds will be conducting transactions in large volumes every day,” said chief executive of Nabil Investment Banking Ltd — fund manager for recently launched Nabil Balanced Fund I — Pravin Raman Parajuli.
At present, brokerage fee is distinguished in terms of kinds of securities that are traded and trading volume. According to regulations, for share trading, brokers can charge one per cent to 0.7 per cent of the amount traded as brokerage fee based on the volume.
Likewise, for trading of bonds and debentures, brokers can charge between 0.2 per cent and 0.05 per cent as commission. Brokers can charge between 0.75 per cent and 0.40 per cent for instruments such as preference shares and mutual fund units. The larger the volume, the smaller is the commission for brokers.
“The broker fee looks small but since we conduct large transactions these commissions become pretty huge,” pointed out Parajuli, adding that the stock exchange can provide a separate platform for the mutual fund to undertake transactions.
“Regulators can provide mutual funds a separate window that does not require going through brokers to place orders so that transactions become swifter and cost less,” he said.
Mutual funds are subjected to higher frictional expenses — the overhead expenses incurred in brokerage commissions, and capital gain tax along with management fees.
At present, there is only one mutual fund listed at Nepse — Siddhartha Investment Growth Fund I — which has been actively trading stocks since January. Likewise, Nabil Balanced Fund I will become functional in two months. NMB Capital is also preparing to launch its mutual fund scheme while Siddhartha Capital is preparing to launch another scheme soon.
“Brokerage commissions are one of the biggest expenses for us. It will be better if the regulator and stock exchange can provide a separate window of trading for mutual funds,” said CEO of Siddhartha Capital Dhurba Timilsina.
Capital market regulator — Securities Board of Nepal (Sebon) — does not agree with providing a separate trading window for mutual funds that bypasses brokers. “The brokerage fee fixed is the maximum allowable charge. Since mutual funds undertake large number of transactions they can ask brokers to give them brokerage service at a discounted rate,” said chairman of Sebon Baburam Shrestha.
“Since mutual funds are managed by professionals, they can make deals with brokers at a competitive price and find the right balance between expenses and income,” he added. At present, there are 58 brokers at the stock exchange.
Source: THT
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