1 week ago
Mutual Fund Expense Ratios Vary Widely Across Equity Categories
Mutual funds charge investors for running and managing the fund.
This charge is called the total expense ratio, or TER.
It is taken from the fund’s assets and affects the daily NAV.
A higher TER can leave investors with lower returns.
The data shows that actively managed funds often have bigger differences in costs than passive funds.
Passive funds usually cost less because they mainly follow an index.
Direct plans generally cost less than regular plans because they do not include distributor costs.
Investors should compare expense ratios even when funds belong to the same category.
Active equity funds show much wider expense-ratio gaps than passive funds, according to Value Research data dated 27 August 2026.
Regular-plan large-cap active funds have the widest diversified-equity spread, ranging from 0.48% to 2.10%.
In direct active diversified funds, flexi-cap and large-cap categories each have a 1.74-percentage-point spread.
Active sectoral and thematic regular funds show the widest gap in the Quant category, at 1.28 percentage points.
Passive sectoral choices are limited, but infrastructure direct plans have the narrowest spread, ranging from 0.38% to 0.39%.
- Who
- Mutual fund investors, fund houses, distributors, and fund managers are affected by the expense-ratio differences.
- What
- Value Research compared expense-ratio ranges across active and passive diversified, sectoral, and thematic equity-fund categories.
- Where
- Across the mutual-fund categories covered in the Value Research data.
- When
- The data was dated 27 August 2026.
- Why
- Expense ratios are deducted from scheme assets, so higher costs can reduce investors’ eventual returns.
Key facts
- Expense ratio
- The total cost charged for management, administration, transactions, and other fund expenses.
- Highest regular active diversified spread
- Large-cap funds: 0.48% to 2.10%, a 1.62-percentage-point gap.
- Highest direct active diversified spread
- Flexi-cap and large-cap funds: 1.74 percentage points each.
- Narrowest direct active diversified spread
- Small-cap funds: 0.33% to 0.81%, a 0.48-percentage-point gap.
- Widest regular active sectoral or thematic spread
- Quant funds: 1.28 percentage points.
- Widest regular passive sectoral spread
- PSU funds: 0.84 percentage points.
- Narrowest direct passive sectoral spread
- Infrastructure funds: 0.38% to 0.39%, a 0.01-percentage-point gap.
Sources
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