MF News SEBI hikes exposure limit to housing finance companies for debt funds to 15%

SEBI hikes exposure limit to housing finance companies for debt funds to 15%

The market regulator has allowed AMCs to increase exposure in housing finance companies (HFCs) from 10% to 15% of the net assets of the scheme.
Team Cafemutual Feb 23, 2017

The government’s impetus to the affordable housing and infrastructure sectors in Budget 2017 seems to have increased the confidence of the market regulator in housing finance companies (HFCs).

SEBI has issued a circular in which it has allowed fund houses to increase exposure in HFCs from 10% to 15% of the net assets of the scheme. The circular is applicable with immediate effect.

“Presently, the guidelines for sectoral exposure in debt oriented mutual fund schemes put a limit of 25% at the sector level and an additional exposure not exceeding 10% (over and above the limit of 25%) in financial services sector only to HFCs. In light of the role of HFCs especially in affordable housing space and to further the government’s goal under Pradhan Mantri Aawas Yojana (PMAY), it has now been decided to increase additional exposure limits provided for HFCs in financial services sector from 10% to 5%,” states SEBI circular.

In August 2016, the market regulator had increased this limit from 5% to 10%.

SEBI has clarified that such securities have to be rated AA and above and these issuer HFCs are registered with National Housing Bank (NHB). However, the total investment in HFCs cannot exceed 25% of the net assets of the scheme.

Avnish Jain, Head – Fixed Income, Canara Robeco MF believes that the move will benefits investors. “Currently, HFCs are the largest issuers of AA and AAA rated bonds in the market. In fact, there are some good companies in the HFC space. An additional exposure of 5% will definitely help fund managers increase exposure in these quality bonds which will eventually help investors.”

“Considering the important role played by Housing Finance Companies (HFCs) in fulfilling the social objective of increased home ownership and supporting the economy by creating demand for construction of new homes, SEBI has increased the exposure limit in housing finance company,” said a senior official from a private sector fund house.

After the Amtek Auto incident, SEBI had reduced exposure limit to financial services sector to 25% of NAV from 30%. The exposure limit to Housing Finance Companies (HFCs) was brought down to 5% of NAV from 10% of NAV.

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