Why has SEBI relaxed requirements for asset management companies with respect to passive mutual funds?
Passive mutual funds, which track benchmark indices like the BSE Sensex, are generally considered less risky than actively managed funds.
This is because they aim to replicate the performance of established indices, leading to more predictable outcomes.
Asset management companies (AMCs) have limited discretion in managing passive funds.
AMC’s investment strategies are primarily dictated by the indices they follow, making the existing regulations designed for active funds less relevant.
A separate framework is necessary to accommodate the unique operations of passive funds.
Lower minimum net worth requirements (₹35 crore) encourage new entrants, enhancing competition.
Reduced trustee oversight allows AMCs more control while maintaining essential checks.
Focus on key disclosures helps investors understand fund offerings better.
Easing entry for AMCs aims to boost liquidity and diversify investment options for retail investors.
COMMENTS