Saturday, August 21, 2010

SEBI Limits MFs' Exposure to Derivatives

SEBI Limits MFs' Exposure to Derivatives

 

The Securities and Exchange Board of India (SEBI) has barred mutual funds from writing options or purchase instruments with embedded writer options.

 

The market regulator has also asked fund houses that the total exposure related to option premium paid should not exceed 20 per cent of the net assets of the scheme.

 

The move reiterates that the primary purpose of investment by mutual funds in derivatives is to mitigate risk and not to make profits from such exposures.

 

The existing norms allow mutual funds to invest in derivatives in a manner similar to foreign institutional investors. However, the current regulations do not put any cap on the notional exposure that the mutual funds may take in derivatives as a percentage of their net assets.

 

A circular issued by SEBI on Wednesday on norms for investment and disclosure by mutual funds in derivatives says that the cumulative gross exposure through equity, debt and derivatives should not exceed 100 per cent of the net assets of the scheme.

 

However, it excludes cash or cash equivalents with residual maturity of less than 91 days and exposure due to hedging positions from the above mentioned limits.

 

The new norms allow mutual funds to enter into plain vanilla interest rate swaps for hedging purposes. The counter party in such transactions has to be an entity recognised as a market maker by the Reserve Bank of India. The value of the notional principal in such cases must not exceed the value of respective existing assets being hedged by the scheme. Exposure to a single counterparty in such transactions should not exceed 10 per cent of the net assets of the scheme.

 

The circular further prescribes a particular format for the purpose of uniform disclosure of investments in derivative instruments by mutual funds in half yearly portfolio disclosure, annual report or in any other disclosures.

 

The new norms will be applicable for all new schemes launched after the issue of the circular. All existing schemes should comply with the norms by October 01, 2010.

 

Top 10 Equity Funds in Terms of %Derivatives Exposure

Scheme

 Assets (%)

 Value (Rs Cr)

JM Nifty Plus

35.07

4.44

Birla Sun Life Index

19.66

6

Religare Equity

14.85

4.06

ICICI Prudential FMCG

13.79

10.64

Kotak Emerging Equity

12.4

13.34

DSPBR Natural Resources and New Energy Reg

10.2

18.42

Kotak Lifestyle

9.46

10.23

ING OptiMix Multi Manager Equity Option A

8.57

4.68

ICICI Prudential Focused Bluechip Equity Retail

5.53

76.26

ICICI Prudential Banking and Financial Services Ret

5.34

6.29

Data as on July 31, 2010


--
Safe Harbor:
The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
 
You received this message because you are subscribed to the Google Groups "Investors Please Listen !" group.
To post to this group, send email to investorspleaselisten@googlegroups.com
To unsubscribe from this group, send email to
investorspleaselisten+unsubscribe@googlegroups.com For more options, visit this group at http://groups.google.com/group/investorspleaselisten?hl=en

No comments:

Blog Archive

Life Insurance | Health Insurance | Auto Insurance


Investors Please Listen !

 
More than 100 kinds of Insurance products from more than
20 companies under one roof.



Call: 9818269396 
investorspleaselisten@in.com
www.investorspleaselisten.blogspot.com

 

 

Safe Harbor:

The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
Powered by Olark
Advertising Learn to Invest