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Uniform Benchmark

1. SEBI issued guidelines to standardize benchmarks used by mutual funds to measure performance. 2. Funds will use a two-tiered benchmark structure, with a first-tier broad market index and second-tier index reflecting the investment strategy. 3. AMFI must publish the intended first-tier benchmarks within a month and for debt schemes by December 1st, with the new framework taking effect December 1st and January 1st.

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55 views

Uniform Benchmark

1. SEBI issued guidelines to standardize benchmarks used by mutual funds to measure performance. 2. Funds will use a two-tiered benchmark structure, with a first-tier broad market index and second-tier index reflecting the investment strategy. 3. AMFI must publish the intended first-tier benchmarks within a month and for debt schemes by December 1st, with the new framework taking effect December 1st and January 1st.

Uploaded by

T Srinivasan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Securities and Exchange Board of India

CIRCULAR

SEBI/HO/IMD/IMD-II DF3/P/CIR/2021/652 October 27, 2021

All Mutual Funds/

Asset Management Companies (AMCs)/

Trustee Companies/Boards of Trustees of Mutual Funds /

Association of Mutual Funds in India (AMFI)

Sir/ Madam,

Subject: Guiding Principles for bringing uniformity in Benchmarks of Mutual


Fund Schemes

1. In order to standardize and bring uniformity in the Benchmarks of Mutual Fund


Schemes and taking into account the recommendations of Mutual Fund
Advisory Committee (MFAC), it has been decided that there would be two-
tiered structure for benchmarking of schemes for certain categories of
schemes. The first tier benchmark shall be reflective of the category of the
scheme, and the second tier benchmark should be demonstrative of the
investment style / strategy of the Fund Manager within the category. All the
benchmarks followed should necessarily be Total Return Indices.

2. The following are the guiding principles for first tier benchmarks:
i. For Income / Debt Oriented Schemes
First Tier: One Broad Market Index per Index Provider for each category
e.g.: NIFTY Ultra Short Duration Debt Index or CRISIL Ultra Short Term
Debt Index for Ultra Short Duration Fund Category
Second Tier: Bespoke according to Investment Style/Strategy of the
Index e.g.: AAA Bond Index

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Securities and Exchange Board of India
ii. For Growth / Equity Oriented Schemes
First Tier: One Broad Market Index per Index Provider for each category
e.g.: S&P BSE 100 Index or NSE 100 Index for Large Cap Fund Category
Second Tier: Bespoke according to Investment Style/Strategy of the Index
e.g.: Nifty 50 Index

iii. For Hybrid and Solution Oriented Schemes:


There would be a single benchmark, i.e., Broad Market Benchmark
wherever available or bespoke to be created for schemes, which would
then be applicable across industry.

iv. For Thematic / Sectoral schemes:


There would be a single benchmark as characteristics of the schemes are
already tapered according to the theme/sector.

v. For Index Funds and Exchange Traded Funds (ETFs):


There would be a single benchmark as these schemes replicate an
underlying index.

vi. For Fund of Funds Schemes (FoFs):


Similar to Index Fund and ETFs, if a FoF scheme is investing in a single
fund, then benchmark of the underlying scheme shall be used for
corresponding FoF.
However, in case a FoF scheme invests in multiple schemes, then Broad
Market Index shall be applied.

vii. For Other Schemes:


Depending on underlying asset allocation, Broad Market benchmark may
be arrived at.

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Securities and Exchange Board of India
3. AMFI is advised to publish:
(a) Benchmarks intended to be used by AMCs as first tier benchmarks within a
period of one month from the date of issuance of this circular.
(b) Benchmarks intended to be used as first tier benchmark by AMCs for open
ended debt schemes as per the Potential Risk Class Matrix on or before
December 1, 2021.
4. The second tier Benchmark is optional and shall be decided by the AMCs
according to Investment Style/Strategy of the Index.

Applicability of the circular

5. The framework specified by AMFI as referred at para 3(a) above shall come
into force with effect from December 1, 2021 and the framework specified by
AMFI as referred at para 3(b) above shall come into force with effect from
January 1, 2022.

6. This circular is issued in exercise of the powers conferred under Section 11 (1)
of the Securities and Exchange Board of India Act, 1992, read with the
provision of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996 to
protect the interests of investors in securities and to promote the development
of, and to regulate the securities market.

Yours faithfully,

Bithin Mahanta
General Manager
Tel no.: 022-26449634
Email: [email protected]

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