2024-04-08 12:35:56
Mumbai: SEBI has continuously expressed concern about the increasing inflows into small cap funds of mutual funds. Market regulator SEBI has asked mutual fund houses why they sold smallcap schemes to super senior citizens (80-85 years). It is noteworthy that smallcap schemes are considered quite risky.
Strong rise in small caps
In the last few months, small cap and midcap stocks have seen a strong rise and seeing high returns, investors started running towards small caps. In such a situation, it also came to light that fund houses sold smallcap schemes even to such investors whose risk profile did not suit that product. It also came to light that these schemes were sold even to super senior citizens aged 80-85 years. According to sources, market regulator SEBI has raised questions to AMC in this regard.
More risk in small cap schemes
Financial planners say that small cap fund schemes have so much short-term volatility that it is not considered appropriate for senior citizens and those with low risk profiles to invest in them. According to a fund executive, SEBI has sent emails to such AMCs in which super senior citizens have been seen investing in small-cap schemes. SEBI has asked investors to confirm whether they are aware of the high risks in such funds.
No standard procedure
Market experts say that currently there is no standard procedure to inform investors about the risks. Therefore it is not a matter of rules. This is a conversation taking place in the interest of the industry and investors. All fund houses educate investors in their own way.
It is not easy to get out if the market crashes!
After making stress test mandatory for fund houses some time ago, SEBI is now expressing concern about the risk profile of investors. MF Stress Test looks at how ready small and midcap funds are for redemption. The stress test results indicate that mid-smallcap funds may take a significant amount of time to sell if there is a market crash. On the other hand, AMFI has said that MF will have to publish stress test results every 15 days. Recent results show that it will take 27 days to liquidate 50% of the small cap portfolio.