Sebi on Monday issued frameworks to manage the risk level in commodity investments (gold and gold-related instruments) by mutual funds. “It has been decided that investment in commodities by mutual fund schemes shall be assigned a risk score corresponding to the annualised volatility of the price of the said commodity,” Sebi said in a circular. The new framework will come into force immediately.
The regulator said the annualised volatility would be computed quarterly based on past 15 years’ prices of the benchmark index of the said commodity. Annualised volatility of less than 10%, 10-15%, 15-20% and more than 20% will have risk score of 3 (moderate), 4 (moderately high), 5 (high) and 6 (very high), respectively.
If price of gold has annualized volatility of 18% based on price of past 15 years, then gold and gold-related instruments will have risk value of 5 (high) on risk-o-meter,” Sebi explained.
On October 5, 2020, Sebi had said that investment in gold and gold-related instruments by schemes will be valued at ‘moderatly-high’ risk perspective. It also ordered mutual funds to disclose the risk level of schemes as on March 31 of every year, along with number of times the risk level has changed over the year, on their websites and the Amfi website.
