SEBI vide circular dated April 11, 2022, has specified guidelines for evaluation of risk levels of scheme for the purpose of risk-o-meter with reference to SEBI circular on ‘Product Labeling in Mutual Fund schemes.
For evaluation of the risk value of commodities in which mutual funds are permitted to invest, in terms of para 2(d) of SEBI circular on ‘Product Labeling in Mutual Fund schemes – Risk-o-meter’, it has been decided that investment in commodities by mutual fund schemes shall be assigned a risk score corresponding to the annualized volatility of the price of the said commodity.
The annualized volatility shall be computed quarterly based on the past 15 years’ prices of the benchmark index of the said commodity and risk score for the commodity shall be in terms of the following table:
| Annualized volatility | Risk value on risk-o-meter(Risk) |
| <10% | 3 (Moderate) |
| 10-15% | 4 (Moderately High) |
| 15-20% | 5 (High) |
| >20% | 6 (Very High) |
Illustration: If the price of gold has annualized volatility of 18% based on the price of gold of the past 15 years, then Gold and gold related instruments will have a risk value of 5 (High) on risk-o-meter.
Accordingly, para 3(viii) of Annexure A to the said circular pertaining to risk value of gold and gold related instruments stands modified as above.
This circular shall come into force with immediate effect
Circular Link:-
About the Author
