New Delhi: Markets watchdog Sebi on Monday proposed a relaxed regulatory framework for the passively managed mutual fund (MF) schemes in a bid to reduce compliance requirements. Considering the lesser risk inherent in managing passively managed MF schemes, the proposed MF Lite intends to reduce the compliance requirement, foster innovation, encourage competition and promote ease of entry for the MFs interested in launching only passive schemes, Sebi said in its consultation paper.
Passively managed MF schemes replicate an underlying index such as ETFs and index funds where portfolios of index funds can be easily tracked. Active fund schemes requires expert fund managers who define investment philosophy and select securities. The present regulatory framework for MFs is however uniformly applicable for all MF schemes and does not differentiate regarding the applicability of provisions relating to entry barriers -- net worth, track record, profitability -- and other compliance requirements for entities who may be desirous of launching only passive funds.