The new SEBI norms to improve performance disclosure in AIF and uniform private placement memorandum would help financial advisors make smart choices for their clients, believes industry experts.
Last week, SEBI introduced a new set of rules for AIF players to disclose performance across AIF categories. With this, AIF players will now have to disclose performance of schemes with respect to benchmark in all marketing communication. Another key decision was to standardise the private placement memorandum issued by AIFs to their clients. Private placement is sale of the fund’s units to a limited group of individuals.
Experts believe that the move will help distributors understand and evaluate performance of AIFs. Nalin Moniz, CIO-Alternative Equity, Edelweiss Mutual Fund believes that the move will bring more transparency. “Creation of peer-level benchmarking for AIFs is a big positive for the industry. Currently, AIF industry has 3 broad categories and 600 players. The new norm will segregate funds based on their strategies such as large cap, multi cap and so on. Also, benchmarking disclosure would ensure if the funds have outperformed their respective indices.”
“Another element is uniformity in private placement memorandum that will help advisors compare various funds,” he added.
Shahzad Madon, Head PMS and Alternative Strategies, Nippon India Alternative Investments said, “The move will not only disclose performance of AIFs, more importantly, it offers critical data to analyse and evaluate schemes.”
Tarun Birani of TBNG Capital Advisors believes that the move will increase transparency. He said, “Currently, we have to rely on AIF players to get performance data. However, an external benchmarking disclosure would help us get clear picture on performance of AIFs.”
However, a few experts have a different view. Chandigarh IFA, Iqbal Singh believes that the move may not help advisors. “Six month performance disclosure is too short to evaluate performance. In addition, it may encourage many clients to churn just because a fund underperforms its respective benchmark for six months.”