Capital market regulator SEBI is considering doubling mutual funds’ investment limit in REITs and InvITs to 20 per cent for equity and hybrid schemes, while retaining the 10 per cent cap for debt schemes
In a consultation paper issued on Thursday, SEBI, the current single issuer, said overall limits of 5 per cent and 10 per cent respectively in REITs and InvITs restricts MFs keen to take exposure in these instruments as an asset class, and the single issuer limits may be revised, similar to a limit of 10 per cent applicable to investments in equity/ debt instruments.
A higher investment limit in REITs and InvITs would give MFs more investment avenues and further diversify MF schemes. The proposal is also expected to increase the capital inflow into these instruments, broadening their market base and liquidity.
Stakeholders can send in their views before May 11.
SEBI has been receiving representations from stakeholders to classify REITs and InvITs as equity, and consider them as part of equity indices like in global markets.
AMFI and the MF Advisory Committee were of the view that REITs and InvITs should be classified as hybrid securities rather than equity or debt securities due to the difference in the structure related to their cash flows, dividends, half-yearly net asset value calculation based on valuation, and voting rights limited to certain operational decisions.
Further, it was deliberated by the MF Advisory Committee as to whether the inclusion of these instruments as constituents of equity indices would be appropriate and fair to investors in schemes following such indices as benchmarks.
SEBI has sought investors’ comments on whether REITs and InvITs, with features of both equity and debt instruments, can be classified as “equity” and their consequent inclusion in equity indices for the purpose of investment by MFs.