Benchmarking of Scheme’s performance to Total Return Index
Summary
SEBI mandates that mutual fund schemes benchmark their performance against the Total Return Index (TRI) variant of an index. Mutual funds must use a composite CAGR calculation when TRI data is unavailable for the entire period since inception. This circular applies to all mutual fund schemes effective from February 1, 2018.
Text
Mutual Funds are required to disclose the name(s) of benchmark index/indices with which the AMC and trustees would compare the performance of the scheme in scheme related documents.
Selection of a benchmark for the scheme of a mutual fund shall be in alignment with the investment objective, asset allocation pattern and investment strategy of the scheme.
The performance of the schemes of a mutual fund shall be benchmarked to the Total Return variant of the Index chosen as a benchmark.
Mutual funds shall use a composite CAGR figure of the performance of the PRI benchmark (till the date from which TRI is available) and the TRI (subsequently) to compare the performance of their scheme in case TRI is not available for that particular period(s).
Mutual funds shall use the composite CAGR as explained above, subject to making the following disclosure: 'As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR of XYZ (name of the benchmark index) PRI values from date…. to date… and TRI values since date….'
This circular is applicable to all schemes of Mutual Funds with effect from February 1, 2018.
Source: SecMarx — Benchmarking of Scheme’s performance to Total Return Index. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.