Total Expense Ratio Reconciliation And Update As Per SEBI

Total Expense Ratio Reconciliation And Update As Per SEBI

Total Expense Ratio Reconciliation And Update As Per SEBI

There are several internal processes in mutual fund houses and asset management companies (AMC) that take up a lot of their time and effort.

Many of these processes are very crucial to the business as they are mandated by a regulatory body like SEBI.

If these processes can be automated, they can focus more on efficient running and the important financial aspects of the business.

One such process is Total Expense Ratio reconciliation, reporting, and update. In this case study, we will explore what Total Expense Ratio is and how SheetKraft helped automate it.

What Is Total Expense Ratio?

Total Expense Ratio is a measure of the total costs associated with managing and operating investment funds by mutual fund houses or AMC.

These costs consist primarily of management fees and additional expenses, such as trading fees, legal fees, auditor fees, and other operational expenses.

Total Expense Ratio – A Case Study

One of our leading AMC clients was reconciling and updating the Total Expense Ratio Reports manually. They often had to rework their reports because of a high error-rate. Fixing those errors took a major chunk of their time.

They approached our team to automate the process. Our team understood the process, client requirements, and reporting errors due to manual efforts.

The business logic was slightly tricky. The process also included automatically reading emails and fetching attachments and mobile operations among others.

But reconciliation is one of SheetKraft’s forte, so our team successfully fed the logic into the system. 

We’ll talk about how automated reconciliation works. But before that, let’s touch upon how the manual reconciliation was conducted previously.

The Total Expense Ratio Manual Process

As per the SEBI guidelines, AMCs and mutual fund houses must update their Total Expense Ratio daily. This ratio is then to be updated on their website, which means even a marginal difference needs to be updated.

This is either done in-house by the AMC/mutual fund house or by a third-party vendor.

The values in the file are then reconciled with the values stored in their database. This needs to be done for all the funds that the AMC has.

The values for today are reconciled with values for all the previous dates from the start of the month.

Data points such as validation checks, matured schemes, and new schemes are reconciled. Any difference in previous data needs to be reported and forwarded to the concerned AMC departments.

These departments would fix the data with correct values after checking the report.

Once the modified Total Expense Ratio report is generated, it is uploaded to the website.

Automatic Total Expense Ratio Reporting With SheetKraft

After process logic is fed into SheetKraft’s reconciliation module, the process has become extremely easy.

Once the Total Expense Ratio report is received from the AMC’s in-house team or third-party vendor is received via an email. SheetKraft automatically identifies the email. This is done using unique keywords set as the subject line of the email.

The attached Total Expense Ratio report is automatically is downloaded. The database values are simultaneously pulled and SheetKraft compares these values.

SheetKraft also checks for the new and matured fund scheme. The new schemes are added, and the matured ones are removed from the Total Expense Ratio report.

An updated report is generated for all the schemes. This report also highlights the value mismatch between the file received and the database which is then forwarded to the concerned department. 

The respective departments then correct the errors if any and approves them.

Post-approval, the report is sent in a set format. An interesting thing about this report is that it lets a user verify the data using their mobile devices. The error list is mentioned in the email, making it easy for the verifier to verify the data report.

Once the report is approved, SheetKraft automatically uploads the Total Expense Ratio report on the website.

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