MUMBAI: In a bid to weed out the practice of multiple mutual funds being launched on similar themes, the Securities and Exchange Board of India (Sebi) has asked MFs to categorise all their schemes within five baskets -- equity, debt, hybrid, solution-oriented and other schemes.
The regulator has asked mutual funds to ensure that schemes devised under the new norms don’t result in duplication of other plans offered by them. To ensure this, only one scheme per category will be permitted except index funds, exchange traded funds tracking different indices; fund of funds having different underlying schemes; and sectoral or thematic funds investing in different themes.
Moreover, mutual funds will need to analyse each of their existing schemes in light of these categories and submit their proposals to Sebi after obtaining due approvals from their trustees as early as possible, but not later than two months.
Sebi said that the fund houses will have to carry out the necessary changes in all respects within a maximum period of three months. According to the regulator, it is desirable that different schemes launched by a mutual fund are clearly distinct in terms of asset allocation, and investment strategy. Another benefit of the move is that it will ensure that an investor of mutual fund is able to evaluate the different options available, before taking an informed decision to invest in a scheme.
Welcoming the Sebi move, Motilal Oswal AMC managing director and chief executive officer Aashish Somaiyaa said: “The regulatory direction is supportive of our belief that for investors to make optimal choices, the industry needs to offer fewer well defined choices rather than a plethora of clones.”
The circular will apply to all existing open-ended schemes of all mutual funds; all such open ended schemes where Sebi has issued final observations but have not yet been launched; and all open-ended schemes in respect of which draft scheme documents have been filed with the regulator.
To ensure uniformity in respect of the investment universe for equity schemes, Sebi has decided to define large-cap, mid-cap and small-cap. Top 100 companies in terms of market capitalisation will come under the large-cap segment, while those between 101 and 250 positions will be mid-cap and 251st company onwards in terms of market capitalisation will be small-cap.