The expense ratio is something many mutual fund investors seem to overlook. This is the annual charge taken by a mutual fund house for managing your money. A high expense ratio eats into your long-term returns. In 2025, some mutual funds in India charge considerably higher expense ratios compared to others. Here’s a look at the top 10 funds with the highest expense ratios, ranging from 1.95% to 2.57%.
What is Expense Ratio?
The expense ratio is the percentage of your investment that the fund house charges every year for management, administration, and other costs. For instance, if a fund has an expense ratio of 2%, you pay ₹2 for every ₹100 that you invest every year.
Higher expense ratios will cut into your overall returns, particularly over longer periods of time. This is a good reason to check the expense ratio before investing in it.
Top 10 Mutual Funds with Highest Expense Ratios
Here are the 10 mutual funds with the highest expense ratios in 2025:
| Rank | Fund Name | Expense Ratio | AUM (₹ Crore) | 1-Year Return | Reason for High Expense Ratio |
|---|---|---|---|---|---|
| 1 | Taurus Flexi Cap Fund | 2.57% | 363.83 | 3.44% | Smaller AUM, high management cost |
| 2 | Motilal Oswal Active Momentum Fund | 2.56% | 221.90 | 24.33% | High-churn, active management |
| 3 | Motilal Oswal Special Opportunities Fund | 2.56% | 62.14 | 7.18% | Niche picks, high research cost |
| 4 | Motilal Oswal Infrastructure Fund | 2.51% | 81.96 | 17.88% | Sector-specific, concentrated exposure |
| 5 | Motilal Oswal Services Fund | 2.49% | 72.74 | 9.27% | Focused theme, low scale |
| 6 | Taurus Large Cap Fund | 2.41% | 51.63 | 8.09% | Small fund size, limited scale |
| 7 | Taurus Mid Cap Fund | 2.13% | 133 | 6.35% | Mid-cap focus, small AUM |
| 8 | Aditya Birla Sun Life International Equity Fund | 2.08% | 266 | 30.9% | International exposure, compliance |
| 9 | Tata Children’s Fund | 2.07% | 368 | 5.03% | FoF structure, small AUM |
| 10 | Taurus Infrastructure Fund | 1.95% | 9.41 | 5.97% | Small fund, sector-specific risk |
Why Do These Funds Have High Expense Ratios?
- Smaller AUM: Many of these funds, like the Taurus and Motilal Oswal series, have smaller assets under management (AUM). Smaller funds cannot benefit from economies of scale, so their per-unit costs are higher.
- Active Management: Funds like Motilal Oswal Active Momentum and Special Opportunities require constant monitoring and research. This increases their management costs, which are passed on to investors.
- Sector or Theme Focus: Sectoral funds (infrastructure, services) and thematic funds (children’s, momentum) need more research and expert analysis, increasing their expense ratios.
- International Exposure: Funds that invest internationally, such as Aditya Birla Sun Life International Equity Fund, have additional compliance and transaction costs, leading to higher expense ratios.
- FoF Structure: Fund of funds (FoF) like Tata Children’s Fund have higher costs due to managing multiple underlying funds.
What Does This Mean for Investors?
Lower Net Returns
Higher expense ratios reduce your net returns. Over 20 years, the difference in returns between a 1.95% and a 2.57% expense ratio can be significant—sometimes several lakhs.
Suitability
These funds are suitable only if:
- The fund consistently outperforms its peers
- You have a specific reason for investing (sector, thematic, or international)
- You understand the higher costs and are comfortable with them
Compare Before Investing
Always compare expense ratios when selecting mutual funds. If two funds have similar performance, choose the one with the lower expense ratio.
What Should You Do?
- Check the expense ratio before investing.
- Compare returns after adjusting for expenses.
- Prefer funds with lower expense ratios for long-term investing.
- Use high expense ratio funds only for tactical or short-term bets.
Key Takeaways
- Expense ratio matters—higher ratios mean lower net returns.
- Taurus and Motilal Oswal funds dominate the list of high expense ratio funds.
- Sector, theme, international, and FoF funds usually have higher expense ratios.
- Compare expense ratios and returns before investing.
Final Thoughts
Expense ratio is a crucial factor to consider when choosing mutual funds. While high expense ratio funds can sometimes deliver strong returns, they can also erode your wealth over time. Always check the expense ratio and compare it with the fund’s performance before investing. For long-term wealth creation, lower expense ratios are generally better.
So, next time you look at mutual funds, don’t just focus on returns—look at the expense ratio too!
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