SEBI’s ban on sharing live stock price data with third-party apps has effectively ended stock-gaming apps. While Dream 11’s Investro, Kalaari-backed Threedots, Bysos, Stocktry, and Ztocks have shut down, others, including Trinkerr, have paused to reassess their business model.
The capital market regulator, the Securities and Exchange Board of India (SEBI), has issued a consultation paper recommending that mutual funds display risk-adjusted return in addition to return.
According to SEBI’s consultation paper, the “Risk Adjusted Return” (RAR) of a scheme portfolio provides a more comprehensive assessment of a scheme’s performance by quantifying the amount of return earned for each unit of risk incurred to obtain that return.
Although a large number of fund houses provide RAR, SEBI noted that the computation process varies throughout fund houses. It also noted that not every fund house releases RAR data. For example, it found that only 33 of the 39 fund houses with equity schemes publish RAR. Only 27 of the 36 fund firms with hybrid plans reveal their risk-adjusted return figures.
The regulator has now suggested making it required. The Information Ratio (IR) has been proposed in the consultation paper as the standard risk-adjusted ratio that must be provided in order to further improve transparency and standardization.
The fund’s return on assets (RAR) improves with increasing IR.
The ratio of a scheme portfolio’s Tracking Difference (TD) to Tracking Error (TE) during a specified time period is called the IR. The volatility or standard deviation of the excess return is denoted by the TE, whereas the TD represents the portfolio’s excess return relative to its benchmark. As a result, the IR provides information on the excess return the fund has produced for each unit of risk it has assumed.
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