SEBI MF order spurs changes to schemes

SEBI MF order spurs changes to schemes

News:

1. Mutual fund houses to make changes in their Scheme according to directive from SEBI regarding categorisation and rationalisation of mutual fund schemes.

Important Facts:

2. SEBI had issued a directive regarding categorization and rationalization of mutual fund schemes. It defined five categories in which all schemes can be classified as:

• Equity schemes
• Debt schemes
• Hybrid schemes (which invest in a mix of equity and debt)
• Solution-oriented schemes (such as for retirement)
• Schemes (such as index funds and exchange-traded funds)
• Sub-categories like large caps, large and mid-caps and small caps.
• It define the individual characteristics of each of the scheme types and what the portfolio allocation needed

Note: For a large cap fund company should invest at least 80% in large cap shares and a mid-cap fund it should invest at least 65% in mid cap shares.

2. Aim to bring directives

• The number of mutual fund schemes on offer has become large and some of the offerings have been similar without any differentiation, often creating confusion in the minds of investors.
• To bringing uniformity to the schemes and enabling accurate comparisons.

3. Mutual fund companies have been making changes to their schemes to comply with the directive of the SEBI. Across the industry, firms are either renaming their schemes, changing their categories or merging the schemes with other similar schemes.

4. The changes in Mutual fund schemes are disclosed in companies websites.

5. The SEBI directive has accounted for about 30% of schemes in the industry.

6. The investor should analyze the changes on a case-by-case basis to ensure that the asset allocation and category allocation of their portfolio remains intact to the changes.