Emphasise on disclosing small, mid-Cap funds by Asset Management Companies from March: Officials

Investment declaration: Market regulator SEBI and mutual fund industry body AMFI have ordered supplementary disclosures for small and mid-cap funds from this month for maintaining stability, elevating transparency and imparting confidence in investors, as per officials.

The parameters for additional disclosures include valuation, volatility, investor concentration and stress tests, they said.

"We have instructed AMFI to direct AMCs to disclose certain additional data points relating to valuation, volatility, investor concentration, and the percentage holding in small and mid-cap stocks, along with disclosures on stress testing results," SEBI whole time member Amarjeet Singh said. 

Singh was speaking at an Indian Chamber of Commerce event.

Results of the stress test will shed light on how much time it will take for Asset Management Companies (AMCs) to liquidate securities which are equal to 25 per cent and 50 per cent of the Assets Under Management (AUM) of the schemes, on a pro-rata basis.

Singh said a format in consultation with AMFI has been created. 

"The risk management framework is communicated to the Asset Management Companies (AMCs) for disclosure to investors through various channels such as the risk-o-meter, fact sheets, and additional disclosures, particularly for mid-cap and small-cap funds," according to AMFI Chief Executive Venkat Nageshwar Chalasani.

The disclosures, which include liquidy, valuation and concentration, give investors critical information for their decisions.

The elaborate disclosures can be accessed from the websites of AMC and SEBI. 

These measures are an ongoing effort for instilling the confidence of investors, Chalasani said. 

Investor and fund manager conversations are an aspect of the ongoing process for risk management and disclosure, which are implemented through risk-o-meter and fact sheets.

"From March, they will provide additional information on small and mid-cap funds," he said.

The announcement comes on the backdrop of sharp inflows in these funds, with the market capping new levels in an upward trajectory.

SEBI had examined data pertaining to the stress testing of a few schemes. As a consequence of the results, there was a requirement for investors to know about further risks while making investments in these schemes, according to the officials.

In February this year, net assets under management in small-cap and mid-cap funds were at Rs 2,49,079 crore and Rs 2,94,490 crore, respectively. This is against Rs 1,31,586 crore and Rs 1,83,246 crore in the same period last year.