Major Development in Mutual Fund Industry in 2020

There are 3 major developments:

1. Shut down of six debt funds by Franklin: One of the biggest events in the history of the debt funds. Franklin voluntarily winds up six of its debt fund. It questions the biggest benefit of “Open-Ended Funds” which is Liquidity.

2. New rules for multi-cap funds: Multi-cap funds must have a minimum of 75% in equity with at least 25% in Large, Mid, and Small Cap. Earlier it was a minimum of 65% in equity without Cap bifurcation. If Peter Lynch were to manage the fund in current India, then his mind would be shackled more by regulation than by data insufficiency. Funds houses are suggesting an alternate fund category as "Flexi Fund". Let's see, how things play out.

3. A Revised Risk-o-meter: SEBI has added a risk level of “very high” in the risk-o-meter. Guidelines and mythology of risk calculations are modified to include the broader spectrum of risk. SEBI did what it does best – Protecting the interest of the investor. But Investor prefers to stay uninformed. They don’t even care to read 3-5 pages about the schemes published by Fund House (Asset Management Company). SEBI took a quick step after a rigorous analysis of various events during the COVID period.