Sebi plans to split routine as actively managed mutual fund schemes bulk up 7x

Sebi plans to split mutual fund schemes as assets under management have grown sevenfold from 2 to 14 since March 2023, with HDFC Balanced Advantage and Parag Parikh Flexi Cap now over ₹1 trillion. The regulator aims to address the practical challenge of trading mid and small-cap stocks with larger funds.

In a significant move to address the growing size of mutual fund schemes, the Securities and Exchange Board of India (SEBI) has proposed a split routine. This comes as assets under management (AUM) have surged sevenfold, from just two schemes in March 2023 to 14 by June 2025 [1].

The rapid growth, driven by buoyant equity markets and steady inflows, has led to funds like HDFC Balanced Advantage and Parag Parikh Flexi Cap exceeding the ₹1 trillion mark. As funds bulk up, SEBI faces practical challenges in trading mid and small-cap stocks without moving the market [1].

SEBI's proposal acknowledges this challenge and aims to address it by splitting routine trading activities. This move is crucial for maintaining market stability and ensuring efficient trading practices.

The increasing size of mutual funds presents unique challenges, particularly in trading mid and small-cap stocks. Larger funds may struggle to trade these stocks without significantly impacting market prices. By splitting routine trading activities, SEBI hopes to mitigate these issues and promote a healthier market environment.

This development underscores the need for regulatory adaptation to keep pace with the evolving landscape of the mutual fund industry. SEBI's proposal is a step towards ensuring that the industry remains robust and responsive to market dynamics.

References:
[1] https://www.business-standard.com/markets/news/one-scheme-no-longer-fits-all-sebi-plans-split-routine-as-funds-bulk-up-7x-125072000412_1.html