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Sebi issues clarification on asset allocation framework for multi-cap MFs

Regulator Sebi on Sunday mentioned that mutual funds have many choices to satisfy with the necessities of its round pertaining to asset allocation framework for multi cap schemes primarily based on the desire of their unit holders.

In a press launch, the markets watchdog clarified that other than rebalancing their portfolio within the Multi Cap schemes, mutual funds (MF) may inter-alia facilitate change to different schemes by unit holders, merge their Multi Cap scheme with Large Cap scheme or convert their Multi Cap scheme to a different scheme class, for occasion, Large cum Mid Cap scheme.



The clarification got here after the regulator tweaked asset allocation framework for multi cap mutual funds by way of a round issued on Friday, requiring them to take a position a minimal of 25 per cent every in Large, Mid and Small Cap shares, and giving flexibility to the fund supervisor with the steadiness 25 per cent.

In its newest press launch, Sebi famous that some sections of media have reported varied views on the round and varied conclusions are being drawn.

“Sebi is conscious of market stability and therefore has given time to the Mutual Funds till January 31, 2021 to achieve compliance with the circular through its preferred route of which rebalancing of the portfolio is only one such route,” the regulator mentioned.

It is reiterated that to attain the specified goal of True to Label and Appropriate Benchmarking, Sebi will study proposals of the business obtained on this regard, it added.

Multi Cap schemes had flexibility when it comes to allocation to Large, Mid and Small Cap shares however it was noticed that some Multi Cap Schemes have skewed portfolios, with over 80 per cent of funding in massive cap shares akin to Large Cap schemes, and a few Multi Cap schemes have close to zero or insignificant asset allocation to small cap firms.

Therefore, as a way to obtain the goals of True to Label and Appropriate Benchmark, a necessity was felt to overview the scheme traits of Multi Cap schemes and take needed steps to obviously distinguish Multi Cap schemes from different class of schemes, Sebi famous.

“In order to diversify the underlying investments of multicap funds across the large, mid and smallcap companies and be true to label, it has been decided to partially modify the scheme characteristics of multicap fund,” the Securities and Exchange Board of India (Sebi) had mentioned in its round on Friday.



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