A recent Sebi notification on valuation of debt funds has left fund managers in a quandary. The regulator has asked fund houses to value debt instrument below 61 days on the basis of a "fair valuation" method worked out by asset management companies. What's worrying fund houses is the fact that there are 8 to 10 different ways of calculating fair valuation, each having a different impact on the returns of debt schemes. The Sebi order, which was notified last week, states that investment valuations are to be done on the principles of fair valuation - "in truth and fair manner through appropriate valuation policies and procedures." However, the regulator has asked boards of AMCs to identify fair valuation methodologies to value debt papers below 61 days. "The regulator has not proposed any 'fair valuation' model. To tell you the truth, we don't know what Sebi means by 'fair valuation'," said the fixed income head of a bank-promoted fund house.
Source: Economic Times
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