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Market regulator SEBI has linked the amount to be invested by an asset management company in a mutual fund scheme to the risk-o-meter score of the particular scheme and made it mandatory for the fund house to maintain the investment percentage throughout the tenure of the scheme.
Subsequently, AMCs will have to invest 0.13 per cent of very high-risk funds while their investment in high-risk and moderately high-risk funds will be 0.11 per cent and 0.09 per cent. In moderate-risk schemes, AMCs have to invest 0.07 per cent and for the low-to-moderate risk and low-risk schemes, the mandatory investment limit has been set at 0.05 per cent and 0.03 per cent, said the SEBI circular on Friday.
Mark-to-market loss
The mandatory investments need to be made from the net worth or by the sponsor of the AMC to fulfil the investment obligations. The AMCs should make good the shortfall in minimum net worth later within two consecutive quarters.
AMCs have to get a statutory auditor certificate on temporary mark-to-market loss, SEBI said. They must conduct a quarterly review of the investments made in each scheme to ensure compliance which fluctuates either due to a change in the value of the AUM or the risk value assigned to the scheme, it said.
Further, based on a review of quarterly average AUM, the shortfall in the value of the investment in schemes has to be made good within seven days. The AMC also has an option to withdraw any excess investment than what is mandated, pursuant to the review, said SEBI.
Mohit Nigam, Head (PMS), Hem Securities, said the difficulty for an MF is not about meeting the minimum investment mandated but holding investment over and above the prescribed limits. “AMCs have to progressively invest a higher chunk in the schemes as fund flow increases with higher participation,” he added.
AMCs are exempted from making the mandatory personal investments in ETFs, index funds, overnight funds, fund of funds schemes, and close-ended funds launched before the amendment of the regulation.
Earlier investments made in any schemes by the AMC in excess of the SEBI mandate cannot be redeemed but can be adjusted to future commitment.
The compliance on AMC investments has to be monitored by the Trustees and any non-compliance has to be reported in the quarterly compliance test report and half-yearly Trustee Report besides disclosing scheme-wise AMC investment on the website of AMCs and AMFI.
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