Indian regulator plans to allow mutual funds with performance-based fees

India’s market regulator is planning to permit a new category of mutual fund schemes where asset managers’ charges will partly be linked to performance, according to an official document reviewed by Reuters and a source directly familiar with the matter.

As part of the proposal, the Securities and Exchange Board of India (SEBI) wants to allow additional charges if a fund consistently outperforms a relevant benchmark index and gives higher annualised returns, according to an internal SEBI document.

The proposal to introduce performance-linked charges on select mutual fund schemes has not been previously reported. According to the plan, the base fees currently charged for mutual funds would be reduced and additional charges would be based on performance.