Direct funds are those mutual fund schemes that are directly offered by the fund house or an Asset Management Company(AMC). The names of these funds are prefixed by the word ‘direct’. There is no involvement of a third party, distributor, or agent.
The investors directly deal with the AMC offering the fund without any third party or broker. Since there is no involvement of a third party, there are no commissions or brokerage charges involved in these transactions. Hence, the expense ratio of direct plans is comparatively lower than that of regular funds.