You are here: Home » Markets » Mutual Funds
Business Standard

Sebi brings framework to have uniformity in benchmarks of MF schemes

For thematic or sectoral schemes, Sebi said there would be a single benchmark as characteristics of the schemes are already tapered according to the theme/sector

SEBI | Mutual Funds

Press Trust of India  |  New Delhi 

File photo: PTI
File photo: PTI

To standardise and bring uniformity to the benchmarks of mutual fund schemes, on Wednesday came out with a two-tiered structure for benchmarking certain categories of schemes.

The first tier benchmark will be reflective of the category of the scheme, and the second tier benchmark will be demonstrative of the investment style/strategy of the fund manager within the category, said in a circular.

All the benchmarks followed should necessarily be Total Return Indices, it added.

"The second tier benchmark is optional and shall be decided by the AMCs according to investment style/strategy of the index," it said.

The new benchmarking guidelines will be applicable for schemes like debt-oriented, equity-oriented, hybrid and solution, thematic, index funds and exchange-traded funds (ETFs) and Fund of Funds Schemes (FoFs).

For debt oriented schemes and equity-oriented schemes, said under the first tier there would be one broad market index per index provider for each category. In the second tier, bespoke would be according to the investment style or strategy of the index.

In the case of hybrid and solution-oriented schemes, the regulator said there would be a single benchmark, i.e., broad market benchmark wherever available or bespoke to be created for schemes, which would then be applicable across industry.

For thematic or sectoral schemes, Sebi said there would be a single benchmark as characteristics of the schemes are already tapered according to the theme/sector.

With regard to index funds and ETFs, the regulator said there would be a single benchmark as these schemes replicate an underlying index.

"Similar to Index Fund and ETFs, if an FoF scheme is investing in a single fund, then benchmark of the underlying scheme shall be used for the corresponding FoF. However, in case an FoF scheme invests in multiple schemes, then broad market index shall be applied," Sebi said.

For other schemes, the regulator said that depending on underlying asset allocation, the broad market benchmark may be arrived at.

Industry body Amfi has been asked to publish benchmarks intended to be used by asset management companies (AMCs) as first-tier benchmarks within one month.

The framework will come into force from December 1.

Also, the industry body has been asked to publish benchmarks intended to be used as a first-tier benchmark by AMCs for open-ended debt schemes as per the Potential Risk Class Matrix till December 1. The guidelines will become effective from January 1.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, October 27 2021. 19:21 IST