According to data from the Association of Mutual Funds in India, the Assets Under Management (AUM) has grown five-fold from Rs 8.14 trillion to Rs 39.46 trillion in 10 years, as of the end of February 2023. The AUM has also increased from Rs 22.20 trillion to Rs 39.46 trillion, a two-fold increase in just five years. The Securities Exchange Board of India (SEBI) has been instrumental in facilitating this growth and ensuring the safety of investors. As the last financial year ended, SEBI implemented important reforms to improve the investor experience and protect their interests.
The regulator recognizes the role of technology in assisting dispute resolution framework and has included the use of Online Dispute Resolution (ODR) mechanisms across registered intermediaries and regulated entities to strengthen investor grievance redressal. Market Infrastructure Institutions (MIIs) are currently limited to stock and commodities exchanges and depositories, but now administer reconciliation and arbitration mechanisms that extend to investors of registered intermediaries and/or regulated entities. The regulator has streamlined the dispute resolution process and adopted measures to strengthen enforcement of awards.
Impact investing has been on the rise, particularly since the pandemic, with investment options across the world employing Environment, Social and Governance (ESG) parameters. Fund managers make investment decisions based on a company’s/stock’s performance on these criteria. Currently, fund houses are allowed to launch or operate only one fund under this category, which requires investing 65% of their assets (AUM) in listed entities with assurance on business responsibility and sustainability. The regulator has amended SEBI Listing Obligations and Disclosure Requirements, 2015 and SEBI Mutual Funds Regulations, 1996 to facilitate fund houses to launch multiple funds as SEBI allows them to create a scheme category focused on ESG themes.
The regulator has mandated the introduction of Business Responsibility and Sustainability Reports (BRSR) to improve the reliability of ESG disclosures. The regulator has also established a Corporate Debt Market Development Fund (CDMDF), which could act as a buffer facility for the purchase of investment-grade corporate debt instruments during times of stress. Each fund house contributes to this fund, and at times of stress, they could dip into this fund for selling their portfolio securities depending on the contribution made to this fund.
The regulator now allows self-sponsored Asset Management Companies (AMCs) and Private Equity (PE) players to start and operate a mutual fund. PE or its manager with at least five years of experience as a fund or investment manager and experience of investing in the financial sector are allowed to set up and own a mutual fund. The regulator also provides the original sponsor with the flexibility to voluntarily dissociate itself from the mutual fund without requiring a new and eligible sponsor, encouraging further players and increased competition in the market benefiting investors.
Funds operating in international exposure are provided with additional leeway in reporting the fund’s Net Asset Value (NAV). The current regulation for international schemes where at least 80% of total assets permissible overseas investments must declare the NAV by 11 PM of the T-day. T-day is the date of investments in mutual fund units in India. The timeline has now been extended to 10 AM of the T+1 day, allowing investors to get a more accurate value/NAV as markets in the US operate until early morning hours, and the 11 PM of the trade day restricts a complete capture of the value.
