Lack of uniformity in valuation arbitrage prompts Sebi to tweak norms

Different levels of haircuts and different days of taking haircuts for distressed assets was also seen as giving advantage to a certain set of investors

The Securities and Exchange Board of India (Sebi) has pointed out that lack of uniformity in valuation methodology might have aggravated the recent redemption pressures faced by liquid schemes as first-to-exit investors got an unfair advantage of higher net asset values (NAVs) over the invested unitholders.

The regulator, in its board meeting, note pointed out that liquid schemes had seen one-fourth of the assets getting wiped out, following the Infrastructure Leasing & Financial Services (IL&FS) crisis, even though the total exposure of mutual fund (MF) schemes to the IL&FS group was limited to Rs 5,200 crore as on August 31,