Prudential norms for liquidity risk management for open ended debt schemes
Summary
SEBI directs AMFI to prescribe a liquidity risk management framework for open-ended debt schemes within one month. The circular clarifies that net assets excluding minimum liquid assets serve as the base for asset allocation limits. This framework becomes mandatory on December 1, 2021, for existing and new schemes.
Text
AMFI is advised to prescribe a suitable framework, in consultation with SEBI, for liquidity risk management for open ended debt schemes (except Overnight Fund, Gilt Fund and Gilt Fund with 10-year constant duration) within a period of one month from the date of issuance of this circular. The said framework shall be adopted by all AMCs.
For all regulatory limit calculations other than Asset Allocation Limits (e.g. for Macaulay Duration, Risk-o-meter, investment restrictions pertaining to issuer, sector and group), the base to be considered is 100% of Net Assets.
For asset allocation limits... the base shall be considered as Net assets excluding the extent of minimum stipulated liquid assets i.e. 10%.
This framework specified by AMFI as referred under para 2 shall come into force with effect from December 1, 2021, for all the existing open ended debt schemes (except Overnight Fund, Gilt Fund and Gilt Fund with 10 year constant duration) and schemes to be launched on or thereafter.
This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with the provision of Regulation 77 of SEBI (Mutual Funds) Regulation, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Prudential norms for liquidity risk management for open ended debt schemes. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.