Sebi outlines options for MFs on new rules

Sebi outlines options for MFs on new rules

The markets regulator on Sunday outlined the options available to fund managers to comply with rules on how investments should be spread across assets even as the industry raised apprehensions about the challenges in implementing the new portfolio rebalancing norms for multi-cap funds.

The Securities and Exchange Board of India (Sebi) said it will examine proposals by the industry to ensure managers of multi-cap funds stick to the mandate of investing substantially across a wide section of firms.

“Apart from rebalancing their portfolio in multi-cap schemes, they could inter-alia facilitate a switch to other schemes by unitholders, merge multi-cap scheme with large-cap scheme or convert multi-cap scheme to another scheme category, for instance, large cum mid-cap scheme,” Sebi said in a note.

On Friday, Sebi directed multi-cap funds, whose portfolios are dominated by large-cap stocks, to keep at least 25% of their assets each in large-, mid- and small-caps by January 31. Managers said a strict reassignment of assets could trigger massive inflows into mid- and small-cap stocks, reducing the market skew towards large-cap stocks. “Sebi is conscious of market stability and, therefore, has given time to the mutual funds till January 31 to achieve compliance with the circular, through its preferred route of which rebalancing of the portfolio is only one such route,” the regulator added. Amfi welcomed Sebi’s clarification on asset allocation to multi-cap schemes on Sunday and said the industry is committed to following regulations in letter as well as spirit. Amfi will gather feedback from members and revert for non-disruptive execution of multi cap funds portfolio balancing.