Performance Benchmarking and Reporting of Performance by Portfolio Managers
Summary
This circular mandates Portfolio Managers to adopt broad investment strategies and select benchmarks prescribed by APMI for performance benchmarking. It requires specific reporting metrics, including TWRR and XIRR, along with relative performance disclosures in marketing materials. The provisions apply from April 1, 2023, with specific exemptions for certain regulated investor categories.
Text
An additional layer of broadly defined investment themes called “Strategies” shall be adopted by Portfolio Managers. These broad Strategies shall be ‘Equity’, ‘Debt’, ‘Hybrid’ and ‘Multi Asset’.
Each IA shall be tagged to one and only one Strategy from the Strategies as above. This tagging shall be at the discretion of the concerned Portfolio Manager.
APMI shall prescribe a maximum of three benchmarks for each Strategy. While tagging an IA to a particular Strategy, the Portfolio Manager shall select one benchmark from those prescribed for that Strategy.
The Board of the Portfolio Managers shall be responsible for ensuring appropriate selection of Strategy and benchmark for each IA.
Once an IA is tagged to a Strategy and/or to a benchmark, the tagging shall be changed only after offering an option to subscribers to the IA to exit without any exit load.
The changes in Strategy and/ or benchmark shall be recorded with proper justification and shall be verified as part of the annual audit under Regulation 30 of the PM Regulations.
APMI shall prescribe standardized valuation norms for Portfolio Managers same as the corresponding norms applicable to the Mutual Funds.
Portfolio Managers shall mandatorily use valuation services obtained only from one or more of such empanelled valuation agencies for the purpose of valuation of debt and money market securities.
Portfolio Manager shall present the Time-weighted Rate of Return (‘TWRR’) of the IA along with the trailing return of the selected benchmark when communicating/ advertising/ publishing/ mentioning performance of an IA.
Portfolio Manager shall present the Extended Internal Rate of Return (‘XIRR’) for each IA the investor invests in when reporting performance to an investor.
The following shall not be mentioned or implied in performance reporting: Any other categorization/ classification of IAs, except for the Strategy; Model Portfolio returns; The performance of one or more cherry-picked investor(s).
Portfolio Manager shall disclose relative performance of its investment approach in all the marketing material where performance of the concerned investment approach is being presented.
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Source: SecMarx — Performance Benchmarking and Reporting of Performance by Portfolio Managers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.