Sebi to ease compliance burden for passive funds

"By easing the compliance burden, Sebi aims to foster the growth of passive investments in the Indian mutual fund industry," Sebi whole-time member Ananta Barua said while speaking at the mutual fund summit organised by industry body Assocham in the national capital.

  • Updated On May 27, 2023 at 09:23 AM IST
Mutual funds may soon have more freedom to run passive funds such as index funds, Exchange Traded Funds or ETFs, and Fund of Funds investing in ETFs as the market regulator Sebi is likely to come with new norms for these funds. A senior Sebi official said "These regulations will provide greater flexibility for index funds and ETFs, enabling them to offer transparency, diversification, and lower costs to investors.”

Mutual funds have been focusing on passive funds lately as many investors are warming up to the idea of index-based investing or passive investing. Many mutual fund analysts and advisors believe that actively-managed schemes will struggle to beat benchmark indices in the coming years as the market becomes well researched. The introduction of relevant benchmarks based on total return index also made it difficult for active funds to generate extra returns, they say.

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"By easing the compliance burden, Sebi aims to foster the growth of passive investments in the Indian mutual fund industry," Sebi whole-time member Ananta Barua said while speaking at the mutual fund summit organised by industry body Assocham in the national capital.

According to him, Sebi has revised the requirements for sponsoring a mutual fund, enabling entities with sound financial conditions, including private equity funds, to become sponsors without a mandatory profit track record.

According to mutual fund advisors, allowing more freedom to mutual funds to run passive funds will result in more innovations and bring down costs. Passive funds already have significantly lower expense ratios.



  • Published On May 27, 2023 at 09:22 AM IST
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