The Securities and Exchange Board of India (Sebi) in a circular today set a limit of 10% of AUM on mutual fund investment in debt with special features such as debt that converts to equity.

 The Securities and Exchange Board of India (Sebi) in a circular today set a limit of 10% of AUM on mutual fund investment in debt with special features such as debt that converts to equity.

This includes Additional Tier 1 (AT 1) and Additional Tier (AT2) bonds, the regulator specified. Investment in a single issuer of such debt cannot exceed 5% of assets. Funds with such investments or even enabling provisions for such investments should enable side pocketing in their schemes, the regulator said. However existing investments above the limits will be grandfathered (permitted to continue) and the limit will only apply to fresh investments. The circular will come into effect from 1st April 2021.