‘Invest in schemes based on risk’

NEW DELHI: Markets regulator Securities and Exchange Board of India (Sebi) on Friday asked asset management companies (AMCs) to invest in the range of 0.03 to 0.13 percentage of the asset base in their own schemes in a bid to align the interest of the fund houses with investors.

The percentage that needs to be invested depends on the risk level of the scheme, which has been categorized into low, low to moderate, moderate, moderately high, high and very high.

The new framework is aimed at aligning the interest of asset management companies (AMCs) with the unitholders of the mutual fund schemes.

The regulator on August 5 amended mutual fund rules, requiring fund houses to invest in their own schemes depending on the risk level to ensure ‘skin in the game’. The new rules will come into force on the 270th day from the date of notification.

Accordingly, it was decided that based on the risk value assigned to the scheme, AMCs will invest minimum amount as a percentage of assets under management (AUM) in their schemes. However, the regulator did not quantify the minimum amount that needs to be invested by the fund houses that time.

In a circular on Friday, Sebi said in case of scheme which comes under the low risk category, an AMC will have to invest a minimum of 0.03 percentage of the AUM in the scheme, while those under low to moderate category, 0.05 percentage of the asset base needs to be invested.

Further, in case of scheme which has been assigned moderate risk, 0.07 percentage of the AUM needs to be invested in the scheme, while the same for moderately high will be 0.09 percentage, 0.11 percentage for high and 0.13 percentage of the asset base for very high risk.

The investment will have to be maintained at all points of time till the completion of tenure of the scheme or till the scheme is wound up.