SEBI Clarifies Regarding Asset Allocation Of Multi Cap Schemes of Mutual Funds

Securities and Exchange Board of India or SEBI clarified that multi-cap schemes need not necessarily churn their portfolios by selling largecap stocks or buying smallcaps in multi-cap schemes to meet the new norms, but can also exercise options such as merging schemes with largecap funds, re-positioning them as large- and midcap schemes, or facilitating unitholders' switch to another scheme. SEBI said that fund houses can use these options among other things and also noted that it is conscious of market stability and therefore has given time to the Mutual Funds till January 31, 2021 to achieve compliance with the circular, through its preferred route of which rebalancing of the portfolio is only one such rout.

On Friday, SEBI has altered the portfolio allocation rules for multi-cap mutual funds. SEBI has stated 75% of total assets of multi-cap funds have to be invested in equity and equity-related instruments compared to the earlier threshold of 65%. SEBI also stated that multi cap schemes will have to invest at least 25% each in large cap, mid cap and small cap stocks.

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