The Securities and Exchange Board of India (SEBI) on June 28, 2024, issued a Consultation Paper on disclosure of Risk Adjusted Return by Mutual Funds.
The objective of this consultation paper is to seek comments/views from the public on the proposal regarding the disclosure of Risk Adjusted returns of the portfolio of a Mutual Fund scheme (MF Scheme), thereby enabling informed investment decisions by the investors.
The return on investment is a major factor attracting investors to invest in any MF scheme and is highlighted by the Asset Management Companies (AMCs) while marketing respective schemes.
The disclosures of scheme returns are also made by AMCs in the schemes’ abridged Annual Report, report to Trustee by AMCs, fund factsheets, investor account statements, product notes etc. Thus, appropriate disclosure pertaining to scheme returns to investors is presently made, mandatorily or voluntarily, in various documents/disclosures by AMCs.
It is felt that the “Risk Adjusted Return” (RAR) of a scheme portfolio represents a more holistic measure of the scheme’s performance because it quantifies the amount of return generated by an MF scheme for each unit of risk taken to achieve that return.
Based on the information provided by AMCs, the following is observed regarding the disclosure of risk-adjusted return of MF schemes:
• Not all AMCs disclose the RAR for all the categories of MF schemes managed by them.
• Several AMCs disclose the RAR pertaining to a scheme in respective monthly fund factsheets, marketing material etc.
• AMCs do not follow a uniform methodology for the calculation of RAR, frequency of disclosure of the same as well as frequency of NAVs used for calculation of the same.
• Not all AMCs annualise the volatility (standard deviation) used to calculate the RAR of their schemes
Provide your comm
