Swing pricing is a mechanism by which fund houses can effect changes in NAVs in response to inflows and outflows. Conceptually, swing pricing protects the interests of long-term unit holders from value erosion due to heavy redemptions of others within the same fund. When swing pricing mechanism is triggered, and swing factor is made applicable—during normal time or market dislocation—both entering and exiting investors will ideally get a NAV adjusted for swing pricing. Sebi will also examine the applicability of swing pricing mechanism to equity schemes, hybrid schemes, solution-oriented schemes and other schemes such as index funds or exchange-traded funds (ETFs). It can deter corporates from investing in the smaller debt funds because the threshold for implementing swing pricing there will be lower.

Source: Mint July 19, 2021 11:48 UTC