Sebi introduces new flexi cap category in mutual funds

MUMBAI: The Securities and Exchange Board of India (Sebi) on Friday introduced a “flexi cap fund” category in mutual funds, which require such schemes to invest at least 65 per cent of the total corpus in equities, across large, mid and small cap stocks.

The regulator said the circular came into effect immediately, and also stipulated that the fund schemes under the category should include the flexi cap mention.

It said mutual funds will have the option to convert an existing scheme into a Flexi Cap Fund subject to compliance with the requirement for change in fundamental attributes of the scheme.

“It was supposed to happen, and it is a good move,” said Dhirendra Kumar, CEO of mutual fund tracker Value Research. “Some of the big funds that could have faced problems due to the new rules for multicap categorisation, can now get by these new rules,” he said.

In September, Sebi had tweaked the categorisation rules for multicap funds, increasing the minimum equity investment for the category. The market regulator said multicap funds will now invest minimum 75 per cent of total assets in equities with 25 per cent each in largecap, midcap and smallcap companies.

Earlier, the minimum mandated investment in equity and equity-related instruments stood at 65 per cent of the total assets with no guidelines on how they were allocated across segments.