Swing pricing is a mechanism by which fund houses can adjust a scheme net asset value (NAV) in response to inflows into or out of funds. Its purpose is to reduce the impact of large redemptions on existing investors by reducing the value of a fund’s units. When swing pricing is triggered by above-average inflows or redemptions, a scheme’s NAV is adjusted up or down, resulting in the investor subscribing to or exiting trading costs instead of existing unitholders.
The regulator has not decided to implement it only on redemptions of more than Rs 2 lakh from the scheme.
Initially, the swing pricing framework will be implemented only for scenarios involving net outflows from the schemes.
“This mechanism will reduce the impact of large outflows on the remaining investors. This will help in instilling confidence in debt funds,” said the CEO Domestic fund house.
The mechanism will be a hybrid framework with partial swing during normal times and full swing during volatile times as mandated for high risk open-ended debt schemes.
“All AMCs should make clear disclosures with illustrations in the SIDs, including information on how the swing pricing framework works, the circumstances under which it is triggered and the NAV for incoming and outgoing investors,” the circular said. have an impact on.”
For the purpose of determining market disorder, amphi will develop a set of guidelines as part of the recommendations SEBI. The regulator will decide whether to accept the suggestions or not.