TaxTMI 
TaxTMI 
Creation of segregated portfolio in mutual fund schemes
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....ted portfolio' shall mean a portfolio, comprising of debt or money market instrument affected by a credit event, that has been segregated in a mutual fund scheme. 2. The term 'main portfolio' shall mean the scheme portfolio excluding the segregated portfolio. 3. The term 'total portfolio' shall mean the scheme portfolio including the securities affected by the credit event. C. AMC may create segregated portfolio in a mutual fund scheme subject to the following: 1. Segregated portfolio may be created, in case of a credit event at issuer level i.e. downgrade in credit rating by a SEBI registered Credit Rating Agency (CRA), as under: a. Downgrade of a debt or money market instrument to 'below investment g....
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....eived, which in no case shall exceed 1 business day from the day of credit event, the subscription and redemption in the scheme shall be suspended for processing with respect to creation of units and payment on redemptions. b. Once trustee approval is received by the AMC, i. Segregated portfolio shall be effective from the day of credit event ii. AMC shall issue a press release immediately with all relevant information pertaining to the segregated portfolio. The said information shall also be submitted to SEBI. iii. An e-mail or SMS should be sent to all unit holders of the concerned scheme. iv. The NAV of both segregated and main portfolio shall be disclosed from the day of the credit event. ....
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....get redemption proceeds based on the NAV of main portfolio and will continue to hold the units of segregated portfolio. • Investors subscribing to the scheme will be allotted units only in the main portfolio based on its NAV. ii. In case trustees do not approve the proposal of segregated portfolio, subscription and redemption applications will be processed based on the NAV of total portfolio. 7. Disclosure Requirements In order to enable the existing as well as the prospective investors to take informed decision, the following shall be adhered to: a. A statement of holding indicating the units held by the investors in the segregated portfolio along with the NAV of both segregated portfolio an....
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.... may be provided to the investors at the time of recovery and also at the time of writing-off of the segregated securities. 8. TER for the Segregated Portfolio a. AMC shall not charge investment and advisory fees on the segregated portfolio. However, TER (excluding the investment and advisory fees) can be charged, on a pro-rata basis only upon recovery of the investments in segregated portfolio. b. The TER so levied shall not exceed the simple average of such expenses (excluding the investment and advisory fees) charged on daily basis on the main portfolio (in % terms) during the period for which the segregated portfolio was in existence. c. The legal charges related to recovery of the investments of the ....
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....n place to negatively impact the performance incentives of Fund Managers, Chief Investment Officers (CIOs), etc. involved in the investment process of securities under the segregated portfolio, mirroring the existing mechanism for performance incentives of the AMC, including claw back of such amount to the segregated portfolio of the scheme. 10. AMCs desirous of having a provision of segregated portfolio in existing scheme shall ensure that all relevant disclosures are made in the SID of such schemes. The provision to enable creation of segregated portfolio in the existing scheme shall be subject to compliance with Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996. 11. The existence of the provisions for segregat....