The recent guidelines from Sebi on consolidation and merger of mutual fund schemes, would reduce the clutter and make it simple for the investors to easily compare the performance of various mutual fund schemes offered by the fund houses.
Uniform definitions for fund categories were brought out by Sebi, in a bid to lessen the number of mutual fund schemes. The open-ended funds, offered by the fund houses, would be applicable under the Sebi’s move.
The mutual funds were divided by the market regulator under 5 categories
- equity funds
- debt funds
- hybrid funds
- solution-oriented funds
- other funds
As per the instructions from Sebi, the fund houses have to adhere to these guidelines ‘within two months in letter and spirit’. Experts believe that this move from Sebi will lessen the clutter and paves way for easy comparison of the performance of various mutual funds amid a level-playing field.
- In total 2,000 funds are there in the industry, out of which 830 are open-ended funds and 1,200 are close-ended funds.
- 120 funds out of 830 are excluded by the market regulator.
- Hence, rest 710 funds would be affected by the Sebi notification.
- 220 out of 710 funds are equity funds and the rest 490 are debt funds.
- The 220 equity fund would be categorized into 10 sub-categories.
- The 490 debt funds would be categorized into 16 sub-categories.
- The 220 equity funds would be possibly reduced to 210, while the 490 existing debt funds would possibly be reduced to 450.
- No major reduction is likely for the 30-35 balanced funds.
- It is likely for each mutual fund house is likely to end up with a maximum of 40 funds in its bouquet of offering in future.
According to Sebi, the issue of scheme classification was taken up at the Mutual Fund Advisory Committee (MFAC).
As per a circular, Sebi said, “There is a need to bring in uniformity in the characteristics of similar type of schemes launched by different Mutual Funds,”
“This would ensure that an investor of Mutual Funds is able to evaluate the different options available, before taking an informed decision to invest in a scheme.”
For more information approach Sebi-registered online advisory, ArthaYantra – World’s Only Full Service Robo Advisory.