MFs have many options to meet 25% limit requirement on multi-cap schemes: SEBI

The capital markets regulator, in a circular issued on Friday, specified that minimum investment in equity and equity related instruments of large-, mid- and small-cap companies should be minimum 25 per cent each of total assets.

Market regulator Sebi on Sunday said mutual funds (MFs) have many options to meet with the requirement of 25 per cent limits on multi-cap schemes based on the preference of their unitholders.

Apart from rebalancing their portfolio in the multi-cap schemes, mutual funds could facilitate switch to other schemes by unitholders, merge their multi-cap scheme with their large-cap scheme or convert their multi-cap scheme to another scheme category (for instance large-cum-mid cap scheme), the Securities and Exchange Board of India (Sebi) said in a clarification.

The capital markets regulator, in a circular issued on Friday, specified that minimum investment in equity and equity related instruments of large-, mid- and small-cap companies should be minimum 25 per cent each of total assets.

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“Sebi is conscious of market stability and therefore has given time to the mutual funds till January 31, 2021 to achieve compliance with the circular, through its preferred route of which rebalancing of the portfolio is only one such route,” the circular stated.

Sebi reiterated that to achieve the desired objective of true to label and appropriate benchmarking, it will examine proposals of the industry, if any, received in this regard.

According to the market regulator, it has recently been observed that some multi-cap schemes have skewed portfolios, with more than 80 per cent of investment in large-cap stocks akin to large-cap schemes, and some multi-cap schemes having near zero or insignificant asset allocation to small-cap companies.