SEBI asks mutual funds to disclose information ratio of schemes

SEBI directs mutual funds to disclose information ratio for equity schemes to enhance transparency and aid decision-making by investors.

To bring more transparency in disclosures made by AMCs and aid better decision-making by investors, Securities and Exchange Board of India (SEBI) on Friday (January 17, 2025) directed mutual funds to disclose the information ratio (IR) of a scheme along with performance disclosure.

Further, disclosure of IR, a financial metric to measure the Risk-adjusted Return (RAR) of a scheme portfolio, will be applicable only for equity-oriented schemes.

“Considering the significance of volatility of performance in determining the suitability of MF schemes, the information ratio is an established financial ratio to measure the RAR of any scheme portfolio. It is often used as a measure of a portfolio manager’s level of skill and ability to generate excess returns, relative to a benchmark and also attempts to identify the consistency of the performance by incorporating standard deviation/risk factor into the calculation,” SEBI said.

In a circular, SEBI has asked mutual funds to disclose the information ratio of a scheme portfolio on their website, along with performance disclosure, on a daily basis.

Industry body Amfi will have to ensure that such disclosure will be available on its website in a comparable, downloadable (spreadsheet) and machine-readable format.

To bring uniformity across different MFs, SEBI also came out with a methodology for the calculation of IR for different categories of mutual fund schemes.

The provisions will come into force with effect within three months from the issuance of this circular.