SEBI revamps mutual fund rulebook, Pg16

Key Highlights:

• SEBI revamped mutual fund rules for the Rs 81 lakh crore industry.
• Solution-oriented schemes like retirement and children's funds, totaling Rs 60,000 crore, will be merged with similar asset allocation schemes.
• Fund houses can now invest up to 35% of a scheme in gold, silver, and InvITs.
• Portfolio overlap between sectoral/thematic funds and other equity schemes must be less than 50%.
• Lifecycle funds, goal-based schemes with target date maturity, have been introduced.

Detailed Insights:

• SEBI's changes aim to ensure mutual fund schemes are more true-to-label in their portfolio construction.
• The removal of solution-oriented funds is viewed as a positive step towards simplifying the mutual fund landscape.
• Increased investment limits in gold, silver, and InvITs are expected to create new demand in these asset classes.
• Restrictions on portfolio overlap are intended to reduce redundancy and potentially increase churn within fund portfolios.
• Lifecycle funds will adjust asset allocation through a glide path, catering to goal-based investments with a target date.
• Fund houses can now offer both Contra and Value schemes, providing investors with more choices.

Key Concepts Involved:

• Mutual Fund: A professionally managed investment scheme that pools money from many investors to purchase securities.
• InvITs (Infrastructure Investment Trusts): Investment vehicles that pool money to invest in income-generating infrastructure projects.
• Portfolio Overlap: The extent to which different investment funds hold the same assets.
• Glide Path: The strategy of automatically adjusting the asset allocation of an investment portfolio over time, typically becoming more conservative as the target date approaches.