Industry body Amfi prescribes new benchmark for mutual fund schemes

Industry body Amfi has prescribed a new benchmarking system for mutual funds for each of their schemes in a bid to standardize and bring uniformity in the benchmarks.

It has listed out first-tier benchmarks for 67 types of mutual fund schemes. This includes categories of debt, equity, hybrid and solution-oriented funds, information available with the Association of Mutual Funds in India (Amfi) showed on Friday.

This comes in the wake of guidelines issued by capital market regulator Sebi in October last year to bring uniformity in benchmarks of the schemes.

It mandated a two-tier structure of benchmarking for certain categories of schemes.

"Having a common category benchmark is useful for investors to make a relative performance comparison for funds within a category to a single benchmark, which is typically representative of the broader investment universe for the category.

"In addition, several other ratios that investors use like Information ratio, Capture Ratios, etc will be calculated using a common benchmark for a category," Kaustubh Belapurkar, Director Manager Research, Morningstar India, said.

According to him, funds can also benchmark themselves against a secondary benchmark which is representative of their investment style. This will help investors identify the specific style of a fund and compare the fund's performance to that benchmark too.

Sandeep Bagla, CEO at Trust MF, said there was a need to construct bespoke indices, which would truly reflect the fund management style. For a new fund offering too, an investor can now see the performance of the benchmark and take an informed decision. This is a progressive step from Sebi.