On Thursday, PricewaterhouseCoopers and industry body CII released a report that concluded the mutual fund industry in India is facing a new threat, high operations costs.

The report was given at the "Mutual Fund Summit 2008" and suggested that staff compensation and lease rentals were two contributing factors for rising costs.
Other leading factors for high costs included the challenge of retaining top employees as well as complying with various regulations.

"Right from fund management to treasury, compliance and accounting, there are just not enough experienced resources around," the report said. “To get the best talent is difficult but to retain them is even more daunting. Compliance is top on the agenda of every company [and] the cost of compliance further pushes up the cost of doing business."

Although the report mainly focused on the fact that operational costs are obstacles in the industry, it also spoke to the large earnings potential for mutual fund companies.

"The revenues as a percentage of assets under management for asset management companies in India compare to and in some cases are even higher than other developed markets," the report said.

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