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Sebi puts in place guiding principles for bringing uniformity in mutual fund benchmarks


To standardise and bring uniformity to the benchmarks of mutual fund schemes, Sebi 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, Sebi 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, Sebi 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 markets 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.



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