CIRCULAR
SEBI/HO/IMD/IMD-PoD-2/P/CIR/2025/6 January 17, 2025
To
All Mutual Funds
All Asset Management Companies (AMCs)
All Trustee Companies/ Boards of Trustees of Mutual Funds
Association of Mutual Funds in India (AMFI)
Dear Sir/Madam,
Subject: Disclosure of Risk adjusted Return - Information Ratio (IR) for Mutual Fund
Schemes.
1. The extant provisions of the SEBI (Mutual Funds) Regulations, 1996 (hereinafter referred
to as “MF Regulations”) and Master Circular specified thereunder inter alia mandate filing
of periodic information regarding schemes’ performance by AMCs. Apart from the same,
appropriate disclosures pertaining to scheme returns are also made voluntarily, in various
other documents / disclosures by AMCs.
2. In addition to the above, a need has been felt to mandate disclosure of the “Risk Adjusted
Return” (RAR), which shall represent a more holistic measure of a scheme’s performance.
3. Considering the significance of volatility of performance in determining the suitability of MF
schemes, Information Ratio (IR) is an established financial ratio to measure the RAR of
any scheme portfolio. It is often used as a measure of a portfolio manager's level of skill
and ability to generate excess returns, relative to a benchmark and also attempts to identify
the consistency of the performance by incorporating standard deviation/risk factor into the
calculation.
4. In order to bring more transparency in disclosures made by AMCs and aid better decision
making by investors, proposed disclosure of IR as a financial metric to measure the RAR
of a scheme portfolio, was placed for public consultation and deliberated in Mutual Funds
Advisory Committee (MFAC).
5. Based on the recommendation of MFAC and analysis of public feedback, the following has
been decided:
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A. Disclosure of Information Ratio
5.1.1. Mutual Funds/ AMCs shall disclose IR of a scheme portfolio on their website
along with performance disclosure, on a daily basis.
5.1.2. AMFI shall ensure that such disclosure shall be available on its website in a
comparable, downloadable (spreadsheet) and machine readable format.
5.1.3. IR disclosure shall be applicable only for equity oriented schemes.
B. Methodology for calculation of IR for each category of Mutual Fund schemes
5.1.4. In order to bring uniformity across different MFs, the following shall be taken into
account for calculation of IR for Equity oriented Mutual Fund schemes.
 IR shall be calculated as under:
(Portfolio Rate of Returns less Benchmark Rate of Returns) / Standard
Deviation of Excess Return
Excess Return= Portfolio Rate of Returns less Benchmark Rate of Returns
 Benchmark used in the above formula shall be the Tier 1 benchmark currently
used by the equity oriented Mutual Fund schemes.
 Volatility/Standard deviation shall be calculated on the basis of daily return
values.
 Daily portfolio return shall be calculated using arithmetic function.
C. Awareness amongst Investors:
5.1.5. In order to ensure better understandability about IR by investors, adequate steps
shall be undertaken by AMCs and AMFI to educate investors about RAR, IR and
their significance in scheme performance evaluation. In addition, an allocation
shall be earmarked from the budget for investor education, leveraging
social/mass media channels to maximize outreach and impact.
D. Format for disclosure:
5.1.6. The format for disclosure of IR on the websites of AMCs and AMFI shall be
accessed through the following link:
https://www.sebi.gov.in/sebi_data/commondocs/jan-2025/AnnexureA_to_circular_1_p.xlsx
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5.1.7. In the aforesaid format, a hyperlink to the AMFI website for IR column shall be
embedded, providing clear and concise explanation on the following, in easy-to-
understand language:
5.1.7.1. Explaining IR
5.1.7.2. Formula for calculation of IR
5.1.7.3. Interpretation of IR with sufficient illustrations covering various
scenarios.
5.1.8. In order to ensure uniformity in explanation of IR across the MF industry, AMCs
shall provide a hyperlink in the aforesaid format on their websites, redirecting to
the AMFI website providing detailed explanation of the IR.
6. The provisions of this circular shall come into force with effect within three months from
issuance of this circular.
7. The circular is issued in exercise of powers conferred under Section 11(1) of Securities
and Exchange Board of India Act, 1992, read with the provisions of Regulation 58(1) &
Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of
investors in securities and to promote the development of, and to regulate the Securities
Market.
8. This circular is available on SEBI website at http://www.sebi.gov.in under the category
“Legal -> Circulars”
Yours faithfully,
Lakshaya Chawla
Deputy General Manager
Investment Management Department
Tel: 022 - 26449369
Email: lakshayac@sebi.gov.in
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