Restrictions on investments, Financial Management

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Restrictions on Investments:

A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company, provided that such limit shall not be applicable for investments in government securities and money market instruments. Provided further that investment within such limit can be made in mortgaged backed securitised debt, which are rated not below investment grade by a credit rating agency, registered with the Board.

A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company.

No mutual fund under any scheme should own more than 10% of any company's paid up capital carrying voting rights. Transfers of investments from one scheme to another scheme in the same mutual fund shall be allowed only if, -

Such transfers are done at the prevailing market price for quoted instruments on spot basis.

Explanation - "spot basis" shall have same meaning as specified by stock exchange for spot transactions.

The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.

A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interscheme investment made by all schemes under the same management or in schemes under the management of any other Asset Management Company shall not exceed 5% of the net asset value of the mutual fund.

The initial issue expenses in respect of any scheme may not exceed six percent of the funds raised under that scheme.

Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position, whereby it has to make short sale or carry forward transaction or engage in badla finance. Provided that Mutual Funds shall enter into derivatives transactions in a recognized stock exchange for the purpose of hedging and portfolio balancing, in accordance with the guidelines issued by the Board.

Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature.

Pending deployment of funds, a mutual fund can invest the same in short-term deposits of scheduled commercial bank's.

No mutual fund scheme shall make any investment in:

  • Any unlisted security of an associate or group company of the sponsor; or
  • Any security issued by way of private placement by an associate or group company of the sponsor; or
  • The listed securities of group companies of the sponsor which are in excess of 25% of the net assets.

No mutual fund scheme shall invest more than 10 percent of its NAV in the equity shares or equity related instruments of any company provided that, the limit of 10 percent shall not be applicable for investments in case of index fund or sector or industry specific scheme.

A mutual fund scheme shall not invest more than 5% of its NAV in the unlisted equity shares or equity related instruments in case of open ended scheme and 10% of its NAV in case of close ended scheme.

 

 


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