Think you found a cheap silver fund? Analyst warns it may cost more than you think

A suspiciously low expense ratio on a silver Fund of Fund (FoF) has sparked debate on hidden costs in India’s mutual fund space, with fintech platforms and asset managers accused of masking true fees.

In a LinkedIn post, analyst Nishtha Narang flagged how some FoFs investing in Exchange Traded Funds (ETFs) are advertising misleadingly low Total Expense Ratios (TERs) — without disclosing the underlying ETF’s own charges.

“An unsuspecting investor might feel smart for finding a ‘low-cost’ fund and invest happily — unaware that they’re being charged more than a regular MF,” Narang wrote.

While ETFs are generally known for low costs, FoFs built on top of them carry two layers of expenses: one charged by the FoF itself, and another by the underlying ETF. Yet many fund houses only display the FoF’s TER — often as low as 0.16% — without clarifying the full cost to the investor.

This discrepancy is especially alarming when these products deliver strong short-term returns, drawing in retail investors who assume they’re getting a low-fee deal. Narang notes that while regulators have improved transparency in recent years, expense disclosures remain one of the murkiest corners of the mutual fund industry.

“Just as every food item lists its ingredients, expense ratios should break down every cost the investor will incur,” she said, comparing the practice to older mis-selling tactics in insurance and investment products.

So far, fintech platforms have done little to highlight this layered cost structure, despite their branding around investor-first experiences.

“Surely, they’re aware,” Narang added. “Why hasn’t anyone pushed for this level of transparency?”

With mutual funds being a key financial vehicle for India's growing middle class, calls are mounting for regulators — and platforms — to demand full cost disclosures, not just the surface-level TER.