Important Notification on Mutual Funds

Dear Pentagraph Family Members,

You would be receiving the communications from different mutual funds or rather would have received by now .

The Securities and Exchange Board of India (SEBI) announced a bold move in October 2017. In a circular ( click here to read the circular ) , it did Mutual Fund Categorization and Rationalization into five broad categories (equity, debt, hybrid, solution-oriented and others) and a few sub-categories under them (such as large-cap, mid-cap, small-cap,multicap under equity). Mutual fund houses would then only be able to have one scheme in each sub-category, with some exceptions.

Definition of Large cap, Mid-cap & Small-cap Funds

  1. Large Cap: 1st – 100th company in terms of full market capitalization.
  2. Mid Cap: 101st – 250th company in terms of full market capitalization.
  3. Small Cap: 251st company onwards in terms of full market capitalization.
Pentagraph View 

We , at Pentagraph , believe that this rule will be certainly beneficial in long run for the entire industry.

It will become easier to choose the fund as there are over 1200 open-ended mutual fund schemes. Around a third of these are equity and a fourth are debt schemes .This leads to lot of confusion.

Within equity, 10 sub-categories have been allowed and within debt, 16 sub-categories have been allowed. Fund houses will be allowed only one per sub-category and  you would be able to conduct an apples-to-apples comparison for each category that suits your risk appetite.

As the Funds are likely to make lot of changes in coming days like merger of schemes , changes of its attributes, Pentagraph will study and review its current recommendations & portfolios and will communicate with you all in case of any changes to be made on individual portfolios .  

Pushing for uniformity and transparency in disclosures, Sebi has asked mutual fund houses to prominently disclose the total expenses charged to customers on a daily basis for all schemes under a separate head on their websites. (Click here to read the circular)

The markets regulator also asked them to communicate to investors any change in the base Total Expense Ratio *** (TER) of the scheme through email or SMS at least three working days prior to effecting such change.

So , you would be receiving the communication on the above changes on quite regular basis .

****The TER is a percentage of a scheme’s corpus that a mutual fund house charges towards expenses including administrative and management.

Happy Investing !!

Team Pentagraph