Amfi lists out tier-one benchmarks for 67 types of MF schemes

Comes in wake of Sebi’s guidelines to bring in uniformity in benchmark of mutual fund schemes

Updated on: 1 April 2022 5:42 pm

The Association of Mutual Funds in India (Amfi) has listed out tier-one benchmarks for 67 types of mutual fund (MF) schemes to bring in uniformity among schemes. This includes categories of debt, equity, hybrid, sector, and thematic funds.

This comes in the wake of the guidelines issued by the market regulator, Securities and Exchange Board of India (Sebi), in October 2021, to bring uniformity in benchmarks of MF schemes.

Sebi had mandated a two-tiered structure of benchmarking for certain categories of schemes.

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It had said in a circular that the tier-one benchmark would be reflective of the category of the scheme, while the second-tier benchmark should be demonstrative of the investment style or strategy of the fund manager within the category. All the benchmarks followed should necessarily be Total Return Indices, the circular said.

Prior to this, schemes followed a single benchmark from their respective categories.

Interestingly, within the sector and thematic category alone, Amfi has issued 32 benchmarks. These benchmarks are sector indices of two major exchanges in India, the NSE and the S&P BSE. Earlier, there used to be one benchmark for each sector scheme, but now there will be one additional benchmark.

For instance, a pharma fund which had Nifty Pharma as an index earlier, will now have Nifty Pharma as the tier-1 benchmark, and S&P BSE Pharma as the additional benchmark. This will allow an investor to gauge the performance of pharma schemes with two benchmarks, instead of one.
Amfi has also come up with an additional benchmark for solution-oriented funds, such as retirement and child’s education schemes, according to their asset allocation strategy. There are nine benchmarks in this category, including one broad index S&P BSE 500 Total Return Index. However, Amfi has given the option to the fund houses to choose any of these nine benchmarks according to the asset allocation of their scheme.

The move is expected to help investors compare funds within the same category to a single benchmark that would be representative of the broader category of funds within that sphere. The secondary benchmark, on the other hand, will allow investors to compare the investment style and strategy of the fund against the benchmark within that category.