Sebi allows MFs to create segregated portfolio for unrated debt

Mumbai: The Securities and Exchange Board of India (Sebi) allowed mutual funds to create segregated portfolios for unrated debt or money market instruments of an issuer that does not have any outstanding rated debt or money market instruments.

Such segregation of unrated debt or money market instruments may be created only in case of actual default of either the interest or principal amount.

For the purpose of this circular ‘actual default’ by the issuer of such instruments shall be considered for creation of segregated portfolio.


Asset management companies (AMCs) will inform AMFI immediately about the actual default by the issuer.

Upon being informed about the default, AMFI shall immediately inform the same to all AMCs, and pursuant to this, AMCs may segregate the portfolio of debt or money market instruments of the said issuer.

“Creation of segregated portfolio shall be optional and at the discretion of the AMC,” Sebi said in a circular.

“ It should be created only if the Scheme Information Document (SID) of the scheme has provisions for segregated portfolio with adequate disclosures. All new schemes to be launched after the date of this circular shall have the enabling provisions included in the SID for creation of segregated portfolio,” the regulator said.