Mutual Funds: Matter of trust

Sep 17 2013, 21:26 IST
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SummarySebi’s latest master circular aims to bring more clarity in functioning of AMCs and is likely to benefit retail investors in the long run

Sebi’s latest master circular aims to bring more clarity in functioning of AMCs and is likely to benefit retail investors in the long run

As per latest Sebi guidelines, asset management companies (AMCs) will now have to disclose portfolio for all their schemes, as on the last day of the month, on their websites in a downloadable format. The same rule will apply for half-yearly and annual disclosures. Also, the number of investors holding over 25% of the NAV in a scheme and their total holdings in percentage terms will have to be disclosed in the Statement of Accounts issued after the new fund offer (NFO) and also in the half-yearly and annual results.

The Securities and Exchange Board of India’s (Sebi) latest master circular — issued last week and which supersedes the previous master circular — has underlined that growth funds maintaining 65% of their investments in equities will have to be benchmarked against the Sensex or the Nifty or BSE 100 or Crisil 500. Similarly, balanced funds with an equity investments of 40-65% will have to be compared with a tailored index having 50% of its weight selected from any equity index and the other 50% from an appropriate bond return index.

Income funds with 65% or more of investments in debt instruments will have to be compared with a suitable index that is a representative of the fund's portfolio.

To make the risk profiling of mutual funds clear to investors, the master circular has once again emphasised that all mutual funds will have to label their schemes. The blue colour will indicate that the principal is at low risk, yellow that the principal is at medium risk and brown will mean that it is at high risk. The colour codes will also be described in text beside the colour code box. Mutual fund houses will have to give a disclaimer that investors should consult their financial advisers if they are not clear about the suitability of the product. The label will have to be disclosed in the front page of initial offering application forms, key information memorandum and scheme information documents.

In case of open-ended and closed-ended schemes of a new fund offer (NFO), the subscription will be open for up to 15 days from 30 days in case of open-ended schemes and 45 days for close ended scheme. The NFO period in case of ELSS schemes will, however, continue

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