 "Why stricter Sebi norms will be a blow for liquid schemes")
In a bid to reduce systemic risk -the risk of collapse of an entire financial system - market regulator Sebi has tightened the valuation norms for liquid funds. But the new mandate could also end up restricting companies from parking their surplus funds in liquid schemes.
The Rs 120,000 crore asset under management (AUM) under liquid schemes will soon face a new challenge. Corporates that used to invest money in such short-term risk-free liquid schemes may now look at other options because Sebi has mandated that fund houses must incorporate mark-to-market into net asset values, orNAVs, after 60 days instead of the 90 days stipulated earlier. Basically, this means investors will get stable NAVs only for the first 60 days instead of 90 days earlier.
While this is Sebi’s way of reducing systemic risk of ensuring that funds can live up to the guaranteed returns they promise investors, fund managers predict that this will increase volatility in investments.
The regulator also amended the rules and made it mandatory for fund houses to ensure fair treatment to all investors.
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