Mutual Funds Mandated To Disclose Information Ratio for Equity Schemes
Moneylife Digital Team 20 January 2025
In a move to enhance transparency and facilitate better decision-making for investors, the Securities and Exchange Board of India (SEBI) has directed asset management companies (AMCs) to disclose the information ratio (IR) of their equity-oriented mutual funds (MF) schemes. 
 
The IR is a widely accepted financial metric that measures the risk-adjusted return (RAR) of an MF scheme portfolio. It assesses a fund manager’s ability to deliver returns exceeding a benchmark while accounting for the risks taken, as reflected by standard deviation. 
 
SEBI highlighted the significance of this metric, emphasising that it not only gauges the excess returns generated by a portfolio but also evaluates the consistency of performance by factoring in risk elements.  
 
The market regulator has mandated that AMCs display the IR of their MF scheme portfolios on their websites alongside daily performance disclosures. 
 
Furthermore, the Association of Mutual Funds in India (AMFI) will ensure that these disclosures are accessible on its website in a comparable format, downloadable as a spreadsheet, and machine-readable, making it easier for investors to analyse the data.  
 
To bring consistency across mutual funds, SEBI has also introduced a uniform methodology for calculating the IR across various categories of schemes. This standardisation will ensure that the metric is presented in a consistent manner, allowing investors to make more informed comparisons between different funds, the market regulator says. 
 
The new provisions will come into effect within three months of the issuance of SEBI circular, giving mutual fund houses sufficient time to implement the changes.
Comments
r_ashok41
2 months ago
good idea for more transparency
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