Do bigger equity funds charge less? Direct TER by fund size

The number

Across 303 diversified equity funds, the median Direct plan expense ratio falls from 1.56% a year for funds under ₹500 crore to 0.88% for funds above ₹10,000 crore. That is 68 basis points, or about ₹680 a year on every ₹1 lakh invested, before any difference in returns.

Fund size is each scheme's average assets for July–September 2026, from AMFI. The expense ratio (TER) is the latest filed Direct plan figure, filed between August and October 2026. We counted the Direct plan, Growth option once per scheme, in nine categories: large cap, mid cap, small cap, flexi cap, multi cap, large & mid cap, ELSS, focused and value. Sector and thematic funds are left out, since their costs depend on the theme more than the size, and so are closed-ended ELSS series, which no longer take money.

Four size bands

The slope is steady, and it is steepest at the small end. More than half the funds under ₹500 crore (28 of 49) charge 1.5% or more; none of the 83 funds above ₹10,000 crore does. Their dearest Direct plan costs 1.27%, which is less than the median of the smallest band.

Across all 303 funds the correlation between the log of size and TER is -0.59, a clear but not overwhelming link.

Is it just a category effect?

Categories differ in cost, and big funds are not spread evenly across them, so a fair test compares like with like. We split each category at its median size and compared the median TER of the smaller half with the larger half.

The larger half is cheaper in all nine categories. The gap is widest in value (44 basis points) and large & mid cap (40), then small cap (28), and nearly nil in mid cap, where even the smaller funds are cheap and the gap is 4.

Why size and cost move together

SEBI's rules let an equity fund charge a lower percentage as its assets grow: the permitted base expense ratio steps down at set slabs of average assets. A fund that keeps growing therefore tends to pass some of the saving on, or at least is allowed to. A small fund cannot spread its fixed costs, such as the manager, research, registrar and audit, over many unit-holders, so it sits near the top of its slab. That is a likely reason, not something the filings prove; a few large funds charge more than small ones in the same category.

What the cost gap is worth

A half-point difference compounds every year the money stays invested. The impact of 1% calculator shows what a cost gap does to a corpus over your own horizon, and the SIP calculator does the same for monthly investing. Our note on the Direct versus Regular expense gap shows the larger, more familiar cost difference, and equity expense ratios by fund house shows which houses sit where.

What the numbers do not say

Cheap is not the same as better. In the same sample, the median three-year return was 10.48% a year for funds under ₹500 crore and 11.66% above ₹10,000 crore, with the ₹2,000–10,000 crore band highest at 12.50%. The one-year picture runs the other way, as we show in whether bigger equity funds returned more.

Assets and cost can both be effects of the same cause. A fund with good past returns attracts money and may then cross a slab; the link does not say which came first.

TER is only one cost. Exit loads, turnover and impact cost sit outside it.

This is a description of filed figures, not a recommendation to buy or sell any fund. The screener filters funds by expense ratio and AUM together.