Mid & small cap mutual funds: Regulators took these 4 steps to protect investors from high valuations

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small-cap funds has reached 1.78 crores. In comparison, the large-cap fund folios stand at 1.33 crores. The assets under management (AUM) for mid-cap funds have reached Rs.

2.90 lakh crores nearing the Rs. 2.99 lakh crores AUM for large-cap funds. The AUM for small-cap funds at Rs.

2.47 lakh crores is not far from that of large-cap funds. The investment frenzy of retail investors in mid and small-cap funds in the last few months continues as markets reach new highs. It has concerned market regulator SEBI, and it has now initiated steps to protect retail investors in these funds.

Following SEBI’s instructions, AMFI has asked the Trustees of AMCs to frame a policy to protect the interests of investors. So, what are the steps that AMCs are taking or have been asked by SEBI and AMC to take to protect retail investors? Let us discuss some of them. AMFI has asked the Trustees of all AMCs to put in place a policy to protect the interests of investors in mid and small-cap schemes.

Trustees have been asked to frame the policy in consultation with the Unitholder Protection Committees of the AMCs. The policy should contain appropriate and proactive measures to be taken by AMCs and fund managers to protect investors, including but not limited to moderating inflows, portfolio rebalancing, etc. The policy has to be approved by the Trustees and disclosed on the AMC’s website within 21 days.

As per reports, SEBI has asked AMCs to take steps to restrict fund flows into mid and small-cap mutual fund schemes. While there is a deluge of inflows in mid and small-cap schemes, fund managers are finding it difficult to deploy the money due to the high valuations of individual companies. As a result, some AMCs have already initiated steps by