The Mutual fund houses, AMCs are likely to approach the Securities and Exchange Board of India (SEBI) against the portfolio structure of multi-cap funds. SEBI on Friday had issued a circular mandating composition of multi-cap funds. It had ordered to invest 25% each in large-cap, mid-cap, small-cap stocks.
The tightening of exposure limits in multi-cap funds by SEBI has put the Rs 27.50 lakh crore mutual fund industry in a havoc. The AMC managers now have to look up for other options to manage their Asset Under Management (AUM) with this new portfolio norms. Some executive are making a demand for a ‘flexicap‘ category. It is observed that Flexi-cap product would serve as a way of launching multi-cap funds without adhering to the present norms.
Experts say merging with large- and mid-cap funds could be a more suitable option for some fund houses. “A fund manager is required to allocate a minimum of 35 per cent to large-cap stocks and a minimum of 35 per cent to mid-cap stocks. The remaining 30 per cent of scheme assets are still at the discretion of the fund manager, where he can make allocations across the capitalization curve,” said Amol Joshi, founder of Plan Rupee Investment Services.
One of the main concerns is that due to immediate buying and selling of small-cap stocks and large-cap stocks in large volumes will cause disruptions in the market. The risk-return of profile of investors will also go for a toss. Some AMC managers have requested to extend the implementation by 1 year for a smooth process.
“Mutual funds are going to explore several options to avoid any disruptions to how the scheme is being managed. Once investors get clarity on how these schemes are going to be positioned, and if risk-profile of the scheme is really changing, they can take a call,” said Kirtan Shah, chief financial planner at SRE.
SEBI has stated that the new norms will come into effect one month after AMFI’ report i.e January, 2021.
