2024-07-18 03:58:40
New Delhi: The number of retail investors investing in mutual funds is continuously increasing. In such a situation, market regulator SEBI wants that retail investors who are getting good returns in the bull run should also know how much risk the fund house has taken to get the returns they are getting. SEBI had sought suggestions in this regard. According to sources, SEBI may soon make disclosure about risk-adjusted return (RAR) along with actual return for a scheme mandatory. Experts say that this will help investors in taking decisions.
RAR will be known from the Information Ratio. Under this, it will be necessary to disclose the RAR in addition to the return compared to the benchmark. The Information Ratio will be obtained by dividing the difference in the returns of the portfolio and the benchmark by the additional return. Currently, RAR disclosure is not necessary. Currently, different mutual funds have different methods of calculating it. Knowing the RAR makes it easy to compare different mutual funds. With this, investors can choose funds with the risk taking capacity. If investors want to take more risk, then they can choose funds with high RAR. If one prefers to make safe investments, then investors can choose funds with low RAR and more stable returns.