In order to help investors assess the performance of Portfolio Managers, market regulator has tightened the performance reporting and benchmarking process. The new norms will come into effect from next April.
In addition to maintaining investment approach (IA), Sebi has introduced an additional layer of broadly defined investment themes called Strategies -- Equity, Debt, Hybrid and Multi Asset -- to be adopted by Portfolio Managers.
Each IA shall be tagged to one and only one Strategy at the discretion of the concerned Portfolio Manager.
Portfolio Manager may be tagged to more than one IA to a Strategy, but each IA must be tagged to only one Strategy, said Sebi.
A maximum of three benchmarks can be prescribed for each Strategy. These benchmarks shall reflect the core philosophy of the Strategy. While tagging an IA to a particular Strategy, the Portfolio Manager shall select one benchmark from those prescribed for that Strategy to enable the investor to evaluate relative performance of the Portfolio Managers.
The Board of the Portfolio Managers shall be responsible for ensuring appropriate selection of Strategy and benchmark for each IA.
Once an IA is tagged to a Strategy and benchmark, the tagging shall be changed only after offering an option to subscribers to the IA to exit without any exit load, said Sebi.
The changes in Strategy and/ or benchmark shall be recorded with proper justification and shall be verified as part of the annual audit.
The Association of Portfolio Managers India will prescribe standardised valuation norms for Portfolio Managers same as the corresponding norms applicable to the Mutual Funds.
APMI shall empanel valuation agencies for the purpose of providing security level prices to Portfolio Managers.
Sebi has also tightened the performance reporting format of portfolio managers.