Different rating for Institutional and Regular plan of a fund | Value Research Two plans of a fund scheme can have different star-rating due to variation in their expense ratio...
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Different rating for Institutional and Regular plan of a fund

Two plans of a fund scheme can have different star-rating due to variation in their expense ratio...

I am confused with some of the Value Research ratings between different options of the same fund. For example, ICICI Pru Short Term Fund has Institutional and Regular options investing in the same portfolio. However, the Institutional option is rated 4-stars while the Regular option is rated 2-stars. Why so?
-Anupam Das

The difference in rating is due to the difference in the returns of the two plans. Although these two share the same portfolio they have different expense ratio which has resulted in different returns and ratings. The institutional plan always had an expense of 0.80 while that of regular plan has always been higher than one per cent. The institutional plan has delivered a return of 8.80 per cent while the regular plan has delivered a return of 8.35 per cent over the past three years.

But now following SEBI regulations, all institutional plans have been suspended for sale. Earlier each fund had multiple plans like institutional, retail, super institutional etc. Institutional or Super institutional plans disallowed investments from common investors with high investment minimum. And these plans used to charge much lower expense ratio compared to the regular or retail plan.

Sebi stopped mutual funds to offer multiple plans with varying expense in the same fund. Now funds can operate only two plans in a scheme - Regular and Direct. All erstwhile plans have stopped accepting new money but they continue till old investors remain invested in them.

Few funds still carry ‘Institutional’ in there name. These available Institutional plans are either suspended for sale, which means they do not accept fresh investment or they have retained operations as Institutional plan but function like a Regular plan. Institutional plans which do not accept fresh investments will eventually get wiped out as only redemptions are possible from these plans.




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