The Securities and Exchange Board of India (Sebi) has eased the deadline for revealing the net asset values (NAVs) of funds investing abroad, from July 1, 2023.
This relaxation was granted due to the difference in time zones and market hours that arise when investing overseas. Schemes with stipulated asset allocation got around 11 more hours to disclose their NAVs.
Domestic mutual funds are required to disclose the NAVs of all schemes by 11 pm on the trading day (T-day).
Relevance Of NAV Disclosure
A mutual fund is priced based on the liabilities and assets it holds at the “end of the day”. A mutual fund’s NAV tells investors how much it is worth, and the price at which its units can be bought or sold.
Theoretically, it is calculated by subtracting a company’s total liabilities or a fund from its total assets, and dividing it by the number of units.
Mutual Fund’s assets include cash, shares, bonds, securities, etc. Liabilities include pending payments, fund management charges and other operational expenses.
Based on the NAV that has to be declared before the end of stipulated time and when the investment is made, the investor will receive the NAV for that business day, or the prospective NAV for the next day.
The disclosures are considered important as prospective NAV is the amount that mutual funds disclose. The relaxation is granted “to address the difficulties being faced in calculating NAVs for schemes investing overseas due to differences in time zones and market hours.”
Disclosure Norms For International Funds
A mutual fund scheme with exposure to exchange-traded commodity derivatives and fund of funds must announce its NAV before 9 am and 10 am, respectively, on the day following the trading day.
Any scheme, index fund, or exchange-traded fund (ETF) with at least 80 per cent of assets invested in permissible overseas investments must disclose its NAV by 10 am on the following day of the trading day. They were earlier required to be disclosed on the same day of trade before 11 pm.
Sebi has further said that if fund houses are unable to disclose NAV within the given timeline, they may disclose it as per the disclosure made in the scheme information document along with the reasons for the delay.
“While complying with the new timelines for declaration of NAV, asset management companies (AMCs) as a principle shall ensure that NAV of schemes is disclosed based on the value of underlying securities/funds as on the T-day,” Sebi said in a document.