Sebi allows MFs to launch capital protection scheme

The Securities and Exchange Board of India (Sebi) has given the green signal to mutual funds to launch “capital protection-oriented schemes,” under which investors are assured of their capital invested even if the scheme underperforms.
As per Sebi guidelines, capital protection schemes have to be close-ended. However, investors investing in such schemes will not have an exit option before maturity. Among the guidelines stipulated by Sebi, asset management companies will not be allowed to repurchase units of a capital protection scheme before maturity.
But the asset management company (AMC) will not be allowed to repurchase the units of such a scheme before maturity. Also, AMCs will have to get such a scheme rated by a registered credit rating agency “from the viewpoint of the ability of its portfolio structure to attain protection of the capital invested therein,” the Sebi release said.

Tags: SEBI, Mutual funds, capital protection, schemes, investor, underperformer, sebi guidelines, close-ended, AMC, repurchase, units, maturity, portfolio structure