SEBI makes disclosure of scheme IR mandatory for MFs
Capital market regulator SEBI has made it mandatory for mutual funds to disclose Information Ratio (IR) of scheme portfolio on their website along with performance disclosure on a daily basis.
Considering the significance of volatility of performance in determining the suitability of MF schemes, IR is an established financial ratio to measure the risk adjusted return of any scheme portfolio.
It is often used as a measure of a portfolio manager’s level of skill and ability to generate excess returns, relative to a benchmark and also attempts to identify the consistency of the performance by incorporating standard deviation/risk factor into the calculation.
More transparency
SEBI’s move is to bring more transparency in disclosures made by AMCs and aid better decision-making by investors. The IR disclosure will be applicable only for equity oriented schemes, it said.
The Association of Mutual Funds in India has been mandated to ensure that such disclosure are available on its website in a comparable, downloadable (spreadsheet) and machine readable format.
Better understandability
In order to ensure better understandability of IR for investors, SEBI said adequate steps will be taken by AMCs and AMFI to educate investors about risk adjusted return, IR and their significance in scheme performance evaluation.
In addition, an allocation can be earmarked from the budget for investor education, leveraging social/mass media channels to maximise outreach and impact, it said.
