SEBI will soon come out with regulations that will help industry mitigate risks in debt funds.
SEBI Chief Ajay Tyagi said today that the market regulator is in talks with the MF industry to deal with contagion effect on mutual funds due to liquidity crisis. He was referring to a sudden fall in NAVs of four liquid funds post IL&FS crisis.
He said, "We would gradually take action on that. On any of the policy issues we are examining, in consultation with the industry, and will gradually take appropriate action." he was speaking to reporters at the sidelines of the ninth CII Financial Market Event held today in Mumbai.
Most likely, SEBI is likely to introduce side-pocketing in mutual funds and mark-to-market valuation for all debt securities. SEBI discussed this at the recent meeting of Mutual Fund Advisory Committee (MFAC) to deliberate on rules governing debt funds.
While side-pocketing is a practice in which fund houses can segregate risky assets from the rest of their holdings and cap redemptions, fund houses may have to do mark-to-market valuation of debt securities having maturity of less than 60 days. Currently, SEBI rules says that fund houses have to do mark-to-market valuations of securities having maturity of 60 days and more.
Talking about alternative investments, Tyagi said that AIFs, REITs and InvITs have been gaining prominence among investors. He said that there has been an increase in AIF activities in the past two-three years.
On markets, he said that despite volatility in markets, the domestic capital market has performed better than its peers. He said that while global capital markets have been quite volatile in the current year due uncertain oil prices, Indian markets have done well. He said, "In terms of volatility, indices return, Indian markets have not performed much worse. In fact, they have been better off when you compare with either major developed economies or emerging markets."
