Mutual fund schemes: Sebi brings in timelines for rebalancing portfolios

The Securities and Exchange Board of India (Sebi) Wednesday unveiled guidelines for the rebalancing of portfolios of the schemes launched by mutual funds.

According to Sebi, the rebalancing period will be applicable in the event of deviation from mandated asset allocation mentioned in the Scheme Information Document (SID) due to passive breaches. Barring overnight funds, all schemes will have a mandated rebalancing period of 30 days, in the event of deviation from mandated asset allocation mentioned in the scheme information document due to passive breaches. The mandated rebalancing period for all mutual fund schemes, except index funds and exchange traded funds (ETFs).

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If the rebalancing is not done within the mandated timelines, justification in writing, including details of efforts taken to rebalance the portfolio should be placed before the investment committee concerned. The committee can extend the timelines up to 60 business days from the date of completion of the mandated rebalancing period. According to Sebi, if the portfolio of schemes is not rebalanced within the extended timelines, then the AMCs would not be permitted to launch any new scheme till the time the portfolio is rebalanced. They would also be disallowed from levying exit load.