SEBI to fix minimum liquid investments for all debt-oriented schemes

(Commercial Representative) Mumbai, Ta. 23 September 2020, Tuesday

Ajay Tyagi, chairman of the Securities and Exchange Board of India, the regulator of the capital market, said the latest SEBI standards on investing in multi-cap funds should not be to force mutual funds to invest in small, mid-cap stocks, but to identify the funds labeled. It should not be embarrassing. He also said that the minimum liquid investment for all debt-oriented schemes would be fixed by SEBI in view of the recent high redemption pressures.

Addressing the 9th Annual General Meeting (AGM) of the Association of Mutual Funds in India (AMFI) here today, the SEBI chairman said that the mutual fund industry has to ensure that the label with which it launches the scheme is in line with its requirements. Should. Indefinite categorization only confuses and affects the investor.

It may be mentioned here that SEBI has issued a circular dated September 11, 2020 stating that it has made it mandatory to invest 3% of its portfolio in large cap, 5% in mid and 5% in small cap stocks by February 1, 2021. However, he said that the norms did not force SEBI funds to invest in small, mid-cap stocks, adding that in the interest of investors, these funds should have a portfolio of identification in their schemo-fund with the objective of not confusing investors. done.

On this occasion, the SEBI Chairman further said that the mutual fund industry has been able to cope with the Covid-12 crisis, but some hurdles are still affecting it. The bond market became uninterrupted in March and April and there were buyers only for super rated papers and government securities. The schemes that had credit risks and invested in low rated paper struggled to cope with the redemption pressure. Prudential risk management is the only option for the long-term growth of the industry and to protect the interests of the investor, he said.

He, meanwhile, said that SEBI wanted further changes to be made to improve the risk management of debt mutual fund schemes. This includes making it mandatory for all open-ended debt schemes to have a minimum investment in liquid assets.

Overnight skimo generally invests in liquid assets and there is a provision for liquid skimo to have a minimum investment of 50% in liquid assets, as is not required for other debt-oriented schemes. For this, a framework will be prepared by the committee to determine the minimum asset allocation in liquid assets, taking into account the type of scheme, the type of assets, the type of investors, the results of the stress test, the minimum redemption requirement.

Tyagi further said that in the meantime, SEBI will determine the minimum holding in liquid assets through all debt-oriented schemes, taking into account the recommendations of the Mutual Fund Advisory Committee (MFAC). Meanwhile, when asked about introducing a new benchmark for the FlexiCap category or MultiCap Schemo, he said that the combined weightage of mid and small caps from the benchmark NSE-500 is 18 per cent, SEBI's job is to see that the products are as per its label.