A recent study by AMFI-CRISIL analyses the impact of the SEBI rationalisation exercise and the reshuffling of AUM that followed.
The CRISIL analysis shows that around 4.8% of the open-ended schemes across AMCs, accounting for 4.2% of the total open-ended AUM have been merged. Additionally, 15.5% of open-ended schemes accounting for about 17.3% of the total open-ended AUM have seen a change in the way they were being managed.
In October 2017, SEBI issued guidelines reclassifying all mutual fund schemes under five broad groups: equity, debt, hybrid, solution-oriented, and others (index, exchange-traded funds or ETFs and fund of funds). Each of these five broad categories are further bifurcated into sub-categories whereby there are 10 categories of equity funds, 16 categories of debt funds, 6 categories of hybrid funds and 2 categories each of solution-oriented and other funds. These categories segregate fund groups based on portfolio characteristics such as market capitalisation for equity, duration and credit for debt, and asset allocation for hybrid funds.
In addition, as per the guidelines henceforth a fund house can only have one scheme per sub category (except in the case of index funds, ETFs, fund of funds and sectoral and thematic funds).
Subsequently, many schemes have been merged, renamed and recategorised to align with the market regulator’s circular, said the study.
Let us have a brief look at spread of AUM across different categories of schemes post SEBI rationalisation.
AUM break-up of the new industry structure
The study shows that on the equity side, mutlicap funds are the most popular followed by large cap and ELSS schemes while liquid and low duration schemes hold the top spots on the debt front.
What it means for the industry and investors?
The recategorisation exercise benefits both the investor and the industry, claims the report.
For investors, it simplifies the fund selection and investment process by introducing better nomenclature and clear-cut demarcation between different categories.
For the industry, it ensures more accurate peer group comparisons. It also gives fund managers better clarity and a degree of comfort to follow a set of guidelines in identifying securities.
Finally, it sets the practice of managing the portfolio and generating alpha based on fund manager’s capability and stock selection rather than market capitalisation, says the report.
