The existing regulatory framework for mutual funds applies uniformly to both active and passive MF schemes and does not differentiate between the applicability of provisions related to entry barriers such as net worth, track record and profitability.
Phase 1 of the MF Lite framework implementation will target passive funds based solely on domestic equity passive indexes with total assets under management (AUM) of Rs 5,000 crore or more as on December 31 of each financial year.
All G-Sec/T-bill/SDL based Domestic Target Maturity Bond Passive Funds along with Domestic Regular Continuation Passive Funds with aggregate AUM above the threshold of Rs 5,000 crore as on December 31 of each financial year. Covered. SDL stands for State Development Loan, which is a bond issued by state governments.
Apart from this, all gold ETFs, silver ETFs, and funds of funds (FoFs) based solely on gold or silver ETFs are eligible.
The capital market regulator has also introduced foreign ETFs or FoFs, which are based on a single foreign passive fund. The underlying overseas benchmarks must comply with the MF Lite framework. All FoFs investing in multiple indices will not be covered by the MF Lite framework in phase 1 of implementation, the Sebi circular said. Sebi said it has set up a working group to carry out research and analysis. We recommend a relaxed regime for passively managed MF schemes. This recommendation was then discussed by the Mutual Fund Advisory Committee (MFAC). Following this, the market watchdog has amended the SEBI (Mutual Funds) Regulations, 1996 till notification on December 16, 2024.
The provisions of this Circular will come into effect from March 16, 2025.
