SEO Revises Investment Fees for Funds to Improve Efficiency

EghtesadOnline: The Securities and Exchange Organization is set to revise trading fees it charges investment funds to improve their efficiency.

News ID: ۷۸۶۶۸۰

14 July 2021

According Meisam Fadaee, the SEO deputy for supervising financial institutions, fees henceforth will vary and based on performance.

As per current procedures, investment funds charge a fixed 2% on trade value of the fund regardless of the fund’s return.

“In the past, the performance of a fund had relevance on fees they charged on deals,” Fadaee was quoted as saying by the Securities and Exchange News Agency.

As per the new procedures, the manager of a fund can charge higher trading fees if the portfolio of stock under their management is making higher profit.

Accordingly, the investment fee is cut from 2% to 1.5%. The fee will increases proportionate to percentage of growth in the benchmark of the Tehran Stock Exchange.

“This will motivate funds managers to perform better as they can charge more,” he said, adding that in the past the managers didn’t care much about a fund’s return because they  received a fixed amount based on the Net Asset Value (NAV) of the fund.

NAV represents a fund's per share market value. NAV is calculated by dividing the total value of all the cash and securities in a fund's portfolio, minus any liabilities, by the number of outstanding shares. NAV calculation is important because indicates how much one share of the fund is worth.

According to the official, the new trading fees is planned to put into effect next month and only cover deals handled by stock funds.

Also called equity funds, stock funds invest in stocks. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities.