Disclosure of Risk adjusted Return - Information Ratio (IR) for Mutual Fund Schemes
Summary
SEBI mandates Mutual Funds and AMCs to disclose the Information Ratio (IR) as a measure of risk-adjusted return on their websites daily. The circular specifies that this disclosure applies exclusively to equity-oriented schemes and requires adherence to a standardized calculation methodology. Additionally, AMCs and AMFI must educate investors about IR significance and provide clear explanations via hyperlinks in the prescribed format.
Text
Mutual Funds/ AMCs shall disclose IR of a scheme portfolio on their website along with performance disclosure, on a daily basis.
AMFI shall ensure that such disclosure shall be available on its website in a comparable, downloadable (spreadsheet) and machine readable format.
IR disclosure shall be applicable only for equity oriented schemes.
IR shall be calculated as under: (Portfolio Rate of Returns less Benchmark Rate of Returns) / Standard Deviation of Excess Return... Benchmark used... shall be the Tier 1 benchmark... Volatility/Standard deviation shall be calculated on the basis of daily return values. Daily portfolio return shall be calculated using arithmetic function.
In order to ensure better understandability about IR by investors, adequate steps shall be undertaken by AMCs and AMFI to educate investors about RAR, IR and their significance in scheme performance evaluation. In addition, an allocation shall be earmarked from the budget for investor education...
The format for disclosure of IR on the websites of AMCs and AMFI shall be accessed through the following link: https://www.sebi.gov.in/sebi_data/commondocs/jan-2025/AnnexureA_to_circular_1_p.xlsx
In the aforesaid format, a hyperlink to the AMFI website for IR column shall be embedded, providing clear and concise explanation on the following, in easy-to-understand language: 5.1.7.1. Explaining IR 5.1.7.2. Formula for calculation of IR 5.1.7.3. Interpretation of IR with sufficient illustrations covering various scenarios.
In order to ensure uniformity in explanation of IR across the MF industry, AMCs shall provide a hyperlink in the aforesaid format on their websites, redirecting to the AMFI website providing detailed explanation of the IR.
The provisions of this circular shall come into force with effect within three months from issuance of this circular.
The circular is issued in exercise of powers conferred under Section 11(1) of Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 58(1) & Regulation 77 of SEBI (Mutual Funds) Regulations, 1996...
Source: SecMarx — Disclosure of Risk adjusted Return - Information Ratio (IR) for Mutual Fund Schemes. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.