Managing risk

Debt fund managers need better due diligence models

The Securities and Exchange Board of India’s (Sebi’s) decision to consider changing the guidelines for open-ended debt mutual funds could lead to some reassessment of the segment by investors. The regulator is considering asking all funds to hold a percentage of their portfolios in liquid assets. It may set up an expert committee to create a model for regular stress tests and assessment of the liquidity profiles of schemes. This could be backed up by additional transaction costs to be levied on illiquid portfolios. Better liquidity could ease the situation for funds faced with sudden redemption calls, and it may