Secondary Benchmarks for Portfolio Managers

To: The Principal Officers + Compliance Officers of APMI members + Compliance Officers of APMI Non Members + Portfolio Managers not registered with APMI

Dear All,

In reference to the recommendations made by the Working Group on Ease of Doing Business for Portfolio Management Services, a significant suggestion focused on the selection of secondary benchmarks.

In July’24, we received a communication from the regulator indicating that the current benchmark aligns more closely with the strategy than with the Investment Approach. Consequently, they emphasized the need for a comprehensive exploration of guiding principles for introducing secondary benchmarks and tasked APMI with providing an indicative list of secondary benchmarks, as well as a detailed framework, including the manner and format of disclosure.

Following up on the final submission made by the APMI Benchmarking & Valuation Committee, which was duly approved by the APMI Board, we have received a communication from SEBI today. The attached letter contains further details for your reference – https://www.apmiindia.org/storagebox/images/Circulars/ SEBI%20Communication%20on%20Secondary%20Benchmarks.pdf

The key points regarding the selection and disclosure of secondary benchmarks by Portfolio Managers mentioned in this letter are as follows:

1. Optional Disclosure: The selection and disclosure of secondary benchmarks is purely optional for PM’s.
2. Selection Criteria: If a PM opts to select and disclose a secondary benchmark, it must be chosen from the list of 32 approved benchmarks. This benchmark should align with both the strategy and the primary benchmark.
3. Board Responsibility: The Board of the PM is responsible for ensuring the appropriate selection of a secondary benchmark for each Investment Approach (IA).
4. Single Secondary Benchmark Assignment: Each IA may only have one secondary benchmark assigned.
5. Disclosure Norms: The disclosure norms for secondary benchmarks must align with those for primary benchmarks, and the format for disclosure should be identical.
6. Change Process: Any changes to the secondary benchmark will follow the same procedures as those for changing the primary benchmark, adhering to all relevant rules and regulations.
7. Performance Reporting: Once selected, the performance of the secondary benchmark must be reported in the same manner as the primary benchmark.
8. Potential Modifications: Based on stakeholder feedback, APMI may consult with SEBI to modify the prescribed benchmarks.
9. Website Disclosure: APMI will not disclose the performance of secondary benchmarks on its website; only the performance of primary benchmarks will be displayed.

Submitted for your required compliances.

In case you have any query please feel free to contact us at [email protected].

Warm Regards

Association of Portfolio Managers in India

B-121, 10th Floor, WeWork Enam Sambhav, 

G-Block, Bandra Kurla Complex, 

Mumbai- 400051