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Market Regulator Sebi Introduces Flexi-Cap Category For Mutual Fund Investors

Below the flexi cap class, fund homes may also convert present schemes into flexi-caps.

Capital market regulator Securities and Change Board of India (Sebi) has permitted mutual funds to introduce flexi cap schemes to offer elevated flexibility to mutual funds, practically two months after its asset allocation norms for multi-cap funds led to the demand for flexi cap funds.

“With a view to give extra flexibility to the mutual funds and making an allowance for the suggestions of Mutual Fund Advisory Committee (MFAC), a brand new class named ‘Flexi Cap Fund’ beneath fairness schemes will probably be obtainable,” Sebi stated in a round dated November 6.

A Flexi-cap fund should make investments minimal 65 per cent of complete belongings in fairness and equity-related devices, however, not like multi cap funds, there could be no restriction in allocating funds throughout large-cap, mid-cap and small-cap shares.

The market regulator had, in September, made it obligatory for multi-cap funds to allocate a minimum of 25 per cent of their portfolio to every of the three classes viz. large-cap, mid-cap and small-cap shares by February 2021.

This mounted allocation rule had triggered issues that lots of the mid and small cap shares didn’t have sound fundamentals to benefit further inflows. There have been additionally fears that that present multi-cap funds could be compelled to buy mid- and small-cap shares and these segments wouldn’t have the liquidity to soak up the additional demand.

The Affiliation of Mutual Funds in India (AMFI) had subsequently demanded the formation of a flexi cap class that may not have such stipulations.

Below the flexi cap class, fund homes will even have the choice of changing present schemes into flexi-caps. “Mutual Funds have the choice to transform an present scheme right into a Flexi Cap Fund topic to compliance with the requirement for change in basic attributes of the scheme when it comes to Regulation 18(15A) of SEBI (Mutual Funds) Laws, 1996,” Sebi stated within the round.

However since it will represent a change in attributes, such schemes should give traders a 30-day window to exit, Sebi added.

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