“Mutual funds are subject to market risks. Please read the offer document, carefully,” goes the standard warning that nudges you to know all about a mutual fund (MF) scheme you plan to invest in. However, as per guidelines laid down by the capital market regulator, Securities and Exchange Board of India (Sebi), the offer document is now split into two: a scheme information document (SID) and statement of additional information (SAI). Then, all fund houses also issue the key information document (KIM).
A SID consists of details that are specific to a particular scheme. Every MF scheme is mandated to have this document. For instance, if the fund house launched an equity fund and a debt fund, then both these schemes must have separate SIDs.
SAI consists of information that is common across all MF schemes in a fund house. In the above example, both the schemes will have a common SAI.
You don’t need to mandatorily read SAI as it doesn’t contain crucial information that may affect your decision. But it does contain a host of useful information that you should know, such as information about your fund house’s sponsor company, your MF’s trustees, information about your fund managers and so on.
Key information document
To ensure that you go through your scheme’s vital details, Sebi has mandated that your application forms must be a part of a document that also contains your scheme details. Enter KIM. This is a concise version of your scheme’s SID and contains vital details of your scheme, such as scheme objectives, what they are meant to do, minimum investment amount, their asset allocation, past returns and so on. KIM is meant for those who don’t have time to go through the SID. While the scheme details come in the front, the application forms come at the back. At the time of investing, fill the forms, tear them and give them to the fund house. Although it is mandatory to provide KIM along with forms, some distributors give you just the forms. Make sure you go through at least the KIM before you invest in any MF scheme. Though we suggest that you go through SID as well.
Your fund house is mandated to update the documents at least once a year. If, say, the fund’s chief or a fund manager has quit and the fund houses have got a new one, your fund house has to update its KIM and SAI with the new official’s details. Recently, MFs came out with valuation policies that gave detailed guidelines as to how they will value equity and debt securities in which their schemes invest in. Most fund houses have since updated their SAI. Similarly, recent changes imposed by Sebi will also soon get reflected in your fund houses’ SAI.