Categorisation of MF schemes may impact returns

Sebi set out five broad categories for mutual fund schemes, including equity, debt and hybrid funds

Last week, the Securities and Exchange Board of India (Sebi) set out new norms for the classification of mutual fund schemes. The regulator defined five broad categories which included equity, debt and hybrid. Here are the broader ramifications of the regulator's move: 

Performance differential between schemes to narrow 

With a tighter definition of what constitutes a large-cap, mid-cap, small-cap and multi-cap fund, fund managers will no longer be able to change styles, known in sector parlance as ‘style drift’, just to add to the returns. For instance, until now, it was common for large-cap funds to increase allocation