Mumbai, June 18: High cost of operations is posing a major challenge to the mutual fund industry, a report prepared by PricewaterhouseCoopers and the CII said today.

The report released at the Mutual Fund Summit 2008 said, “one of the biggest challenges for existing and new players is the mounting costs of operations in India”.

Lease rentals and staff costs constitute the bulk of operational costs of most asset management companies, the report said.

While spiralling real estate prices are denting operating margins quite severely, it is becoming increasingly difficult for the industry to get talent to man its operations.

“Right from fund management to treasury, compliance and accounting, there are just not enough experienced resources around. To get the best talent is difficult but to retain them is even more daunting,” the report said.

Referring to various regulations governing the industry, the report said there was cost involved in complying with regulations.