New disclosure rules for debt mutual funds to help detect underlying risks early

Debt mutual funds will have to disclose the portfolio every 15 days, said Sebi in a circular issued on Wednesday. As per current norms, mutual funds disclose their scheme portfolios on a monthly basis. The regulator also mandated mutual funds to disclose the yields of the underlying instruments in the scheme, on a fortnightly basis along with the portfolio disclosure. Mutual fund experts welcome the move as they believe it will help in bringing more transparency to the system.

"In partial modification of SEBI circular on 'Monthly portfolio disclosures', it is decided for debt schemes that, such disclosure shall be done on fortnightly basis within 5 days of every fortnight. In addition to the current portfolio disclosure, yield of the instrument shall also be disclosed," wrote Sebi in the circular.

Mutual fund managers say disclosure of yield of underlying instruments in a scheme's portfolio on a 15 days period is a big move and will help in understanding the level of risk undertaken by investing in a lower-rated papers, if at all, by the schemes very early.

Currently, debt funds don't disclose the yield of each security in a scheme's portfolio. They disclose the indicative yield of the total portfolio on a monthly basis.

Here is what the mutual fund experts say:

Pankaj Pathak, fund manager-Fixed Income, Quantum Mutual Fund

"Its a normal disclosure requirement that used to happen on a monthly basis to disclose the schemes' portfolio for entire month. Now we have to disclose it on a fortnightly basis.

Disclosure of yield of securities in the portfolio is a good move. The idea is to bring more transparency and Sebi is moving in that direction.

Now that the time horizon has been shortened, you will get to know some transactions which will happen over the month.

The portfolio yield gives you a sense of what kind of securities and what level of risk has been undertaken. That gives you some sense of that debt security which will be helpful."

Joydeep Sen, founder of wiseinvestor.in

"Now that the debt mutual funds will have to disclose their portfolio on a fortnightly basis, the investors will get access to the information early. Also, Sebi requires the schemes to disclose yield of the securities. This will help investors to know the quality of the portfolio and understand the level of risk taken by the scheme to a better extent."