An actively managed Mutual Fund Scheme will not invest in more than ……………….of its NAV in debt and money market securities rated A and below of a single issuer. 

Solution

·         SEBI has come out with a new framework which will put a cap on investment made by actively managed mutual fund schemes in a single company's debt instrument. ·         At present, such caps are already in place for passive funds such as Exchange Traded Funds (ETFs) and index funds in a bid to effectively manage the risk associated with such investments. ·         Under this, a mutual fund scheme will not invest more than 10 per cent of its Net Asset Value (NAV) in debt instruments and money market securities rated AAA by a Credit Rating Agency (CRA). ·         The single issuer limit on such securities rated AA is set at 8 per cent, while the same is 6 per cent and below for A-rated securities. ·         The investment limits may be extended by up to 2 per cent of the NAV of the scheme with prior approval of the Board of Trustees and Board of Directors of the Asset Management Company (AMC), subject to compliance with the overall 12 per cent limit.