03 August 2011

MFs to make more disclosures in scheme documents

Market regulator SEBI asked mutual fund houses to disclose the list of sectors in which they will not invest the corpus, in debt schemes, a move which will help investors take a conscious decision before investment.

"In order to enable investors to make a more informed decision regarding the quality of securities and risk associated with different close-ended debt oriented schemes, it is decided that MFs shall disclose the list of sectors they would not be investing," Securities and Exchange board of India (Sebi) said in a circular.
Henceforth, MFs shall have to disclose the type of instruments in which the debt schemes propose to invest namely Commercial Papers, Certificate of Deposits, Treasury bills.

Earlier in 2009, SEBI had barred mutual fund houses from disclosing the indicative portfolio as well as give any indicative yield for close-ended debt oriented schemes.

But experts said that investors were not getting proper information about the nature of securities in which the MFs were investing their corpus. Experts had said the move also dented the popularity of these schemes.
In case of Asset Management Companies, after the closure of offers, they will have to report the publicized percentage allocation and the final portfolio in the next meeting of trustees.

"Variations between indicative portfolio allocation and final portfolio will not be permissible," SEBI said.