Thanks to the sustained rally in the Indian equity markets, mutual funds are gaining national popularity nowadays. This is evident from the sharp rise in the Assets Under Management (AUM) that mutual funds have experienced lately. This trend has made the role of independent mutual fund rating agencies even more critical. Recognising this, the Securities and Exchange Board of India (SEBI) has decided to make them more accountable. The capital market regulator is now pondering on the idea of registering them under SEBI (Research Analysts) Regulations, 2014.

The SEBI released a consultation paper clearly stating that, “Considering the activity of ranking of mutual fund schemes as research report to the public that services as a basis for their investment decision, it is proposed that the activity of ranking of MF schemes shall be brought under the regulatory ambit of SEBI (Research Analysts) Regulations 2014.”

However, it also proposed that "Entities/persons who are providing advice solely on non-securities shall not come under the purview of the SEBI (Investment Advisers) Regulations."

But the registration as a research analyst is not necessary for the platforms offering ranking services in the public domain. Nonetheless, they have to satisfy the regulatory requirements such as disclosure of financial interest and holdings along with the ranking methodology.

What changes have been proposed for the mutual fund rating/ranking agencies ?
 

• Ranking companies must set out a clearly defined methodology
   
• Rating agencies will have to use the quantitative performance parameters to rank mutual fund schemes.
   
• These companies will have to disclose the ranking parameters along with their categories in a very easy-to-understand manner.
   
• There should be disclosures about the directors’ and promoters’ holdings in schemes.
   
• In case there’s no rating assigned, rating agencies will have to provide readers with a justifiable reason.
   
• Rating agencies shouldn’t sell rankings to mutual funds.
   
• All standard disclosures on risks and performance shall be offered explicitly.
   

PersonalFN has always been transparent with its investors. It has already put in place sound disclosure practices that give a detailed account of the processes it follows to assign rakings to mutual funds.

This is what PersonalFN has to say about its services…

PersonalFN's mutual fund ratings is a scheme rating system helping you identify mutual fund schemes that stand strong on all parameters. Our goal of creating PFN Mutual Fund Rating is to help investors select funds that will show consistency and outperform in future.

Most popular mutual fund rating systems are based preferably on past performance data, but PersonalFN believes that past performance is not the only factor to consider while evaluating mutual funds. Past performance may or may not be achieved in the future. From a bouquet of around 2,000 mutual fund schemes across equities, hybrids, debt and liquid, PersonalFN aims to provide you with a comprehensive list of the finest schemes to choose from.

PersonalFN mutual fund rating helps you comprehend where the scheme stands vis-à-vis its peers when tested on all parameters. PersonalFN Research has identified and implemented key parameters that will help find funds outperform in the future. Apart from the quantitative aspects, we also focus on various qualitative factors that lead to achieve the overall performance of the fund.

PersonalFN believes that if the fund house’s investment philosophy, process, and systems are in place, it will result in a radiant performance of the fund in future. The output of our rating system is derived from our stringent scoring model, which ensures that the scheme is tested on various quantitative as well as qualitative parameters, and accordingly compared and scored vis-à-vis its peers. The schemes able to pass through our rigorous test and achieve the maximum composite score on all parameters (based on pre-specified weigtages) will get higher star rating.

To read more about PersonalFN’s mutual fund rating system, click here.

If you want to generate long-term wealth, you try various unbiased mutual fund research services offered by PersonalFN. Recently, we’ve released an Ultimate Strategic Portfolio for 2025 of diversified equity mutual fund schemes that offer a high-reward potential. We strongly recommend you opt for this service if you have an investment time horizon of 7-8 years and have a high risk appetite.

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