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Sebi eyes limits on passive fund launches
20 Aug
Summary
- Sebi considers capping passive fund numbers per category.
- Over 130 passive funds launched last year.
- Experts doubt fund caps will curb index repackaging.
The Securities and Exchange Board of India (Sebi) is reportedly considering a cap on the number of passive mutual funds allowed within each category. This potential policy change comes as the market experiences a substantial surge in passive fund launches, with over 130 introduced in the past year alone, compared to 86 active funds.
The move aims to reduce investor confusion stemming from numerous similar passive funds, such as index funds and exchange-traded funds. Asset management companies currently have the freedom to launch multiple passive funds that track different indices but employ similar investment factors, like momentum or value.
However, industry experts express skepticism about the efficacy of such caps. They argue that fund houses can continuously create new, niche indices, making fund number limitations an ineffective solution. Instead, critics suggest Sebi should focus on regulating the inherent quality and liquidity of the indices themselves, rather than the quantity of funds that track them.
