Listen to this article
SEBI has clarified that fund houses can exclude contribution made towards Corporate Debt Market Development Fund (CDMDF) to arrive at the net assets value to deploy funds based on scheme’s mandate.
CDMDF is an AIF that will buy investment grade corporate debt securities during stressful times to instil confidence amongst market participants and enhance liquidity.
AMCs and specified debt schemes can subscribe for units of Corporate Debt Market Development Fund (CDMDF). These schemes include open-ended schemes, excluding overnight funds, gilt funds (gilt fund and gilt fund with 10 year constant maturity), index funds, ETFs and including conservative hybrid funds.
Earlier, the net asset base was derived after reducing the minimum stipulated liquid investments of 10%. Now mutual funds will also deduct CDMDF units.
Here’s an example to illustrate our interpretation of the circular.
|
Calculation of Allocation Limit of a Banking and PSU Bond Fund |
|
|
Total Asset Base |
100% |
|
Less: Minimum Stipulated Liquid Investments |
10% |
|
Less: CDMDF Units |
0.25% |
|
Net Asset Base* |
89.75% |
* Of this, the mutual fund will invest 80% in debt instruments of banks, public sector undertakings, public financial institutions and municipal bonds.
The provisions of this circular are applicable with immediate effect.
Click here to read the entire circular.
