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SEBI’s Strategic Overhaul of Mutual Funds

  • 31-Jul-2025
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🔍 Enhancing Clarity, Transparency & Flexibility: SEBI’s Strategic Overhaul of Mutual Funds

SEBI, India’s capital markets regulator, has unveiled a progressive set of reforms for the mutual fund industry, aimed at simplifying structures, boosting transparency, and offering more flexibility for fund managers and investors alike.

These regulatory updates are a significant step toward improving investor trust, minimizing overlap, and making mutual fund offerings easier to understand and manage.

🔧 Key Updates Under SEBI’s New Mutual Fund Framework

🔹 Value & Contra Funds Can Coexist – With Limits

Both value and contra schemes will now be allowed within the same AMC, but must maintain a portfolio overlap below 50%, ensuring true strategy differentiation.

🔄 Overlap Monitoring – Now a Compliance Mandate

To maintain portfolio distinctiveness, mutual fund houses must conduct mandatory overlap assessments at the launch (NFO) and repeat them every six months. This will help reduce unintentional duplication and associated risks.

💡 Flexible Deployment of Surplus Funds

Idle funds in equity and debt schemes can now be invested in:

  • REITs (Real Estate Investment Trusts)

  • InvITs (Infrastructure Investment Trusts)

  • Gold and other approved instruments

This creates room for better cash management within schemes.

🏷️ Debt Fund Classification Simplified

SEBI proposes replacing the term “Duration” with “Term” (e.g., “1–3 Years”) in debt fund names to better reflect the fund’s investment period and make it more comprehensible for retail investors.

🏦 Sectoral Debt Funds – A Controlled Introduction

SEBI is allowing sector-specific debt schemes, provided they follow strict regulatory conditions, disclosures, and risk control frameworks to avoid concentration risks.

⚖️ Hybrid and Goal-Based Funds – Better Structure and Clarity

The regulator is streamlining hybrid and solution-oriented schemes with defined:

  • Lock-in periods

  • Asset allocation limits

  • Standardized classifications
    This ensures consistency and better alignment with long-term investment goals.

🌟 Why These Reforms Matter

These updates aren’t just procedural—they deliver real value:

  • ✅ Clearer Scheme Objectives

  • ✅ Reduced Portfolio Redundancy

  • ✅ More Meaningful Comparisons for Investors

  • ✅ Improved Fund Transparency & Naming Standards

  • ✅ Greater Flexibility for Fund Managers

🧑‍💼 What Fund Managers Should Focus On

To stay compliant and competitive, fund managers need to:
✔ Monitor overlap regularly and make timely adjustments
✔ Rename schemes as per SEBI’s updated norms
✔ Ensure NFO funds are deployed within 30 days
✔ Maintain proper documentation for audits
✔ Strategically use the added flexibility in managing fund portfolios

📞 Need Help With Compliance or Strategy Alignment?

Adapting to these new guidelines may require expert insights, especially for fund houses and compliance teams. Whether it's restructuring schemes, audit readiness, or compliance documentation—we can assist.

📲 Book Your Free Consultation
📞 Call Us: +91 93113 47006

📌 Relevant Hashtags:

#SEBI #MutualFunds #Transparency #FundManagers #SEBIGuidelines #InvestmentStrategy #FinancialPlanning #NBFCAdvisor #InvestorProtection #ComplianceMatters

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