The Securities and Exchange Board of India on 27th October 2021 has issued guiding principles for bringing uniformity in benchmarks of mutual fund (MF) schemes. SEBI has 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.
The new benchmarking guidelines will be applicable for schemes like debt-oriented, equity-oriented, hybrid and solution, thematic, index funds and exchange-traded funds (ETFs) and Fund of Funds Schemes.
Under the debt-oriented schemes and equity-oriented schemes, the first tier would be one broad market index per index provider for each category. In the second tier, bespoke would be according to the investment style or strategy of the index.
In the case of 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 the industry.
Further for thematic or sectoral schemes, there would be a single benchmark as characteristics of the schemes are already tapered according to the theme/sector.
The Association of Mutual Funds in India (AMFI) shall publish the benchmarks intended to be used by AMCs as first-tier benchmarks within one month from the date of issuance of its circular. Benchmarks are designed to be used as first-tier benchmarks by AMCs for open-ended debt schemes as per the potential risk class matrix on or before 1 December 2021.
