The Securities Exchange Board of India (SEBI), on January 17, 2025, issued a notification regarding Disclosure of Risk-adjusted Return - Information Ratio (IR) for Mutual Fund Schemes.
SEBI has mandated the disclosure of the Information Ratio (IR) as a financial metric to enhance transparency and aid investors in assessing the Risk-Adjusted Return (RAR) of equity-oriented mutual fund schemes. The IR measures portfolio performance relative to a benchmark, factoring in volatility, and will now be disclosed daily on AMC and AMFI websites in a uniform, comparable, and machine-readable format. The calculation of IR will adhere to a standardized methodology, using daily portfolio returns, benchmark returns, and standard deviation of excess returns.
Additionally, SEBI emphasizes investor awareness by requiring AMCs and AMFI to educate investors about RAR and IR through mass and social media campaigns. The prescribed disclosure format includes a hyperlink to the AMFI website with detailed explanations, formulas, and illustrations of IR. These provisions will take effect within three months of the circular's issuance.
[Notification No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2025/6]
