Benchmarking of Scheme’s performance to Total Return Index

Mutual Funds are required to disclose the name(s) of benchmark index/indices with which the Asset Management Company (AMC) and trustees would compare the performance of the scheme in scheme related documents.

At present, most of the mutual fund schemes (other than debt schemes) are benchmarked to the Price Return variant of an Index (PRI). PRI only captures capital gains of the index constituents. On the other hand, Total Return variant of an Index (TRI) takes into account all dividends/ interest payments that are generated from the basket of constituents that make up the index in addition to the capital gains. Hence, TRI is more appropriate as a benchmark to compare the performance of mutual fund schemes.

With an objective to enable the investors to compare the performance of a scheme vis-à-vis an appropriate benchmark, it has been decided that:

(a)    Selection of a benchmark for the scheme of a mutual fund shall be in alignment with the investment objective, asset allocation pattern and investment strategy of the scheme.

(b)   The performance of the schemes of a mutual fund shall be benchmarked to the Total Return variant of the Index chosen as a benchmark as stated in para (a) above.

(c)    Mutual funds shall use a composite CAGR figure of the performance of the PRI benchmark (till the date from which TRI is available) and the TRI (subsequently) to compare the performance of their scheme in case TRI is not available for that particular period(s).

[Circular No.: SEBI/HO/IMD/DF3/CIR/P/2018/04]