AMFI has issued guidelines to fund houses in which it has formulated a uniform norm for the usage of Riskometer.
Earlier this month, SEBI had introduced Riskometer to help investors gauge the level of risk through a meter. The market regulator has replaced color coding system with Riskometer. In the circular, SEBI said that Riskometer would provide investors an easy understanding of the product/scheme they are investing in and its suitability to them.
The Riskometer will indicate five levels of risk – low (principal at low risk), moderately low (principal at moderately low risk, moderate (principal at moderate risk), moderately high (principal at moderately high risk) and high (principal at high risk).
Here’s how fund houses will use Riskometer
- Low – liquid funds and ultra-short term bond funds having average maturity of less than 90 days
- Moderately low – short to medium term funds having average maturity between 91 days and 3 years
- Moderate- income funds and gilt funds having average maturity of over 3 years; arbitrage funds and debt oriented hybrid funds having up to 20% exposure to equity components in the portfolio
- Moderately high- diversified equity funds, balanced funds, indexed ETF and gold ETF
- High- sectoral funds/thematic funds, international funds and sectoral ETF
The new guidelines will come into effect from July 1, 2015. However, fund houses are allowed to implement this guideline with immediate effect.
