Sebi rolls out standardised format for Specialised Investment Funds

Markets regulator Sebi on Friday introduced a standardized format for applications by mutual funds intending to establish Specialized Investment Funds (SIF) in a bid to ensure uniformity and streamline the processing of such applications.

Additionally, Sebi issued a detailed format for the Investment Strategy Information Document (ISID) for SIFs.

The introduction of SIFs is intended to bridge the gap between mutual funds and Portfolio Management Services (PMS) in terms of portfolio flexibility.

As per Sebi's guidelines, investors are required to invest a minimum of Rs 10 lakh across all SIF strategies. However, this investment threshold does not apply to accredited investors.

In its circular, Sebi said that to ensure consistency and efficiency in application processing, mutual funds looking to launch SIFs are required to submit their applications in a prescribed format.

Under the ISID format requirements, Asset Management Companies (AMCs) will have to disclose the performance of each investment strategy. If the strategy is new, no performance data is to be shown  For strategies in existence for less than one year, AMCs must report absolute returns since inception. For those older than one year, Compounded Annualised Returns (CAR) must be disclosed for 1-year, 3-year, and 5-year periods. Moreover, absolute returns for each of the past five financial years needs to m be presented using a bar chart format.

Beyond performance, detailed portfolio disclosures are required. These include the top 10 holdings by issuer and sector-wise allocation, which must be accessible via a functional website link.

Additionally, the portfolio turnover rating-- indicating how frequently assets are traded-- is required to be disclosed. Information on investments made by the fund manager and the AMC in the strategy should also be available through a website link.

Sebi said that NAV (Net Asset Value) related disclosures are also mandated. AMCs must clearly explain the methodology used for NAV computation and confirm that the repurchase price will not fall below 95 per cent of the NAV.

Regarding expenses, Sebi said that no New Fund Offer (NFO) expenses are to be charged to investors. However, annual recurring expenses-- covering fund management fees, audit charges, registrar and transfer agent fees, marketing, GST, and related costs-- should be transparently disclosed. AMCs must also provide information on the actual expense ratios and how they impact investor returns, accessible through the AMC or SIF website.

Exit loads, if applicable, must be clearly stated and may be revised from time to time.

While presenting investment strategy details, AMCs must offer a clear definition of the strategy, disclose the specific risks involved, state applicable investment restrictions, and describe the types of instruments used, Sebi said.

Fundamental attributes such as the strategy type (open-ended, close-ended, or interval), investment objective (growth, income, or both), asset allocation ranges, and applicable fees and liquidity provisions need to be clearly stated. Moreover, any changes to these fundamental attributes require Sebi's prior review, along with a written communication to investors and a minimum 30-day exit window at NAV without exit load.

For close-ended strategies, additional disclosures are necessary. These include asset allocation ranges, listing and dematerialization of units, minimum target corpus, policies on dividend distribution and redemptions, application and allotment procedures, and refund rules in case of rejected applications.

Sebi said that investor-related information are comprehensively cover who can and cannot invest, the application process, and mandatory requirements such as furnishing bank account details. AMCs need to disclose the name and contact details of the Registrar and Transfer Agent (R&T), along with their official points of acceptance.

Further, subscription and redemption policies must specify cut-off timings, minimum investment and redemption thresholds, and the issuance of a Consolidated Account Statement (CAS) on a monthly and semi-annual basis to provide transparency and help investors track their investments efficiently.