Following the Amtek Auto episode, SEBI has decided to put a cap on sectoral and company specific exposure in debt instruments of mutual funds. The decision was taken at the SEBI board meeting held Mumbai today.
The market regulator has mandated fund houses to reduce exposure in single issuer (individual company) from 15% of NAV to 10% of NAV. However, fund houses can increase this exposure to 12% of NAV after getting trustee approval.
On exposure to group companies, the market regulator has put a cap of 20% of NAV which can be increased up to 25% of NAV after getting approval from trustees.
SEBI has also reduced exposure limit to a single sector to 25% of NAV from the current 30% of NAV. In addition, the exposure limit to Housing Finance Companies (HFCs) has been brought down to 5% of NAV from 10% of NAV.
SEBI has asked trustees to review exposure limits across all schemes in individual companies, group companies and sectors.
At the recent CII Corporate Governance event, SEBI Chief U.K. Sinha had advised AMCs to be careful while investing in debt instruments. Expressing his concern over the recent Amtek Auto episode, he said that fund houses should manage their debt portfolio proactively. He asked fund houses not to rely completely on credit rating agencies and develop expertise on their own.
Earlier, at the AMFI Annual General Board Meeting, Sinha had pointed out that the mutual fund industry had an exposure of Rs.4,000 crore to downgraded paper as on July 2015 which went up to Rs.13,000 crore in August 2015.
