Debt funds get another layer of safety, equity options increase
4 years, 1 month ago

Debt funds get another layer of safety, equity options increase

Live Mint  

The Securities and Exchange Board of India brought in two new regulations recently that aim to enhance the investment experience in mutual funds. While Sebi’s fund categorization exercise gave investors visibility on the credit and interest rate risks in debt fund categories, liquidity risk couldn’t be assessed easily. “The move creates three layers of protection from liquidity risks—cash buffer, liquid assets like G-secs and AAA-rated securities that a fund holds and the available borrowing limits,” said Arvind Chari, head, fixed income and alternatives, Quantum Advisors Pvt. “If the fund holds a lower-rated portfolio and there is a run on the scheme, then the 10% cushion of liquid assets may not really be of much use,” said Joydeep Sen, corporate trainer in debt markets and author, referring to poor liquidity in the bond markets in the sub-AA category. more choice for equity fund investors Sebi’s guidelines in September required the popular multi-cap category to take at least 25% exposure each to large-, mid- and small-cap segments of the market.

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History of this topic

Sebi-mandated stress tests on small, midcaps serve a purpose despite limitations
9 months ago

Sebi-mandated stress tests on small, midcaps serve a purpose despite limitations

Live Mint  

Small-cap stocks typically face liquidity challenges compared to their larger counterparts. In response, the Securities and Exchange Board of India has initiated an evaluation, or stress tests, to determine if fund managers can efficiently liquidate stocks to meet redemption requests. These mandated stress tests on mid- and small-cap mutual fund schemes have uncovered potential higher risks for larger players compared …

Debt mutual funds without indexation are still a great investment bet for medium to long duration
1 year, 8 months ago

Debt mutual funds without indexation are still a great investment bet for medium to long duration

Live Mint  

The debt mutual funds have been gaining scale in India driven by the massive increase in the volume of debt securities. Although there has been a structural alteration in investment themes, the debt MFs primarily have been investing in central government securities, corporate bonds, commercial papers, certificates of deposit, T-bills and state development loans. Having said that, the debt mutual …

How regulations have failed our fixed-income securities market
3 years, 2 months ago

How regulations have failed our fixed-income securities market

Live Mint  

The March 2020 redemption debacle will always be remembered as a moment of reckoning for India’s fixed- income mutual fund industry. Amid the denigration inflicted upon the industry, perhaps the greatest error of judgement pertained to the convenient omission of the fact that India lacks a credible secondary market for corporate debt securities. This means that the risk of holding …

3 changes in debt mutual fund rules you should know
4 years, 3 months ago

3 changes in debt mutual fund rules you should know

Live Mint  

Last few years have not been an easy ride for debt mutual fund investors. In order to bring back and retain the trust of investors, the market regulator Sebi has made several changes in the rules for debt mutual funds. Here are the top three rules which have favored debt mutual funds in recent past that you must know: Seggregation …

Sebi to alter norms for debt funds
4 years, 5 months ago

Sebi to alter norms for debt funds

Live Mint  

Mumbai: The markets regulator, Securities and Exchange Board of India has set up a working group to assess the liquidity risk management of debt funds. The working group is tasked to tweak the liquidity forms for debt funds, especially open ended, said two people with direct knowledge of the matter. This to ensure that liquidity and risk management norms are …

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