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Securities and Exchange Board of India

CIRCULAR
SEBI/HO/IMD/DF3/CIR/P/2020/197 October 05, 2020

All Mutual Funds/

Asset Management Companies (AMCs)/
Trustee Companies/Boards of Trustees of Mutual Funds/
Association of Mutual Funds in India (AMFI)

Sir/ Madam,

Subject: Product Labeling in Mutual Fund schemes – Risk-o-meter

1. Please refer to SEBI circular no. CIR/IMD/DF/5/2013 dated March 18, 2013
and CIR/IMD/DF/4/2015 dated April 30, 2015 captioned as ‘Product Labeling
in Mutual Funds’.

2. SEBI, based on the recommendation of Mutual Fund Advisory Committee

(MFAC), has reviewed the guidelines for product labeling in mutual funds and
the following has been decided:

a. Risk Level of a scheme will be depicted by “Risk-o-meter”, as shown

below:

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Securities and Exchange Board of India
b. For example, the risk depicted in the above risk-o-meter is
Moderately High

c. Risk-o-meter shall have following six levels of risk for mutual fund
schemes:
i. Low Risk
ii. Low to Moderate Risk
iii. Moderate Risk
iv. Moderately High Risk
v. High Risk and
vi. Very High Risk

d. The detailed guidelines for evaluation of risk levels of a scheme

along with few examples are provided at Annexure A. Pursuant to
calculation of risk value of the scheme portfolio based on the
methodology specified in Annexure A, risk level of a scheme as
mentioned at Table 11 of Annexure A shall be depicted by risk-o-
meter shown above at para 2(a).

e. Based on the scheme characteristics, Mutual Funds shall assign risk

level for schemes at the time of launch of scheme/New Fund Offer.

f. Any change in risk-o-meter shall be communicated by way of Notice

cum Addendum and by way of an e-mail or SMS to unitholders of
that particular scheme.

g. Risk-o-meter shall be evaluated on a monthly basis and Mutual

Funds/AMCs shall disclose the Risk-o-meter along with portfolio
disclosure for all their schemes on their respective website and on
AMFI website within 10 days from the close of each month.

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Securities and Exchange Board of India
h. Mutual Funds shall disclose the risk level of schemes as on March
31 of every year, along with number of times the risk level has
changed over the year, on their website and AMFI website.

i. Mutual Funds shall publish the following table of scheme wise

changes in Risk-o-meter in scheme wise Annual Reports and
Abridged summary:
Scheme Risk-o-meter Risk-o-meter level Number of
name level at start of at end of the changes in Risk-
the financial year financial year o-meter during
the financial year

3. Product label shall be disclosed on:

a. Front page of initial offering application form, Scheme Information
Documents (SID) and Key Information Memorandum (KIM).
b. Common application form – along with the information about the
scheme.
c. The product label with respect to (a) & (b) above shall be placed in
proximity to the caption of the scheme and shall be prominently
visible.
d. Scheme advertisements – placed in manner so as to be prominently
visible to investors.

4. Change in risk-o-meter will not be considered as a Fundamental Attribute

Change of the scheme in terms of regulation 18(15A) of SEBI (Mutual
Fund) Regulations, 1996.

5. This circular shall be in force with effect from January 1, 2021, to all the
existing schemes and all schemes to be launched on or thereafter.
However, mutual funds may choose to adopt the provisions of this circular
before the effective date.

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Securities and Exchange Board of India
6. This circular is issued in exercise of the powers conferred under Section 11
(1) of the Securities and Exchange Board of India Act 1992, read with the
provision of Regulation 77 of SEBI (Mutual Funds) Regulation, 1996 to
protect the interests of investors in securities and to promote the
development of, and to regulate the securities market.
Yours faithfully,

Deena Venu Sarangadharan

Deputy General Manager
Tel no.: 022-26449266
Email: deenar@sebi.gov.in

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Securities and Exchange Board of India
Annexure A

Risk level of a scheme shall be evaluated using the following methodology:

1. The underlying securities of a scheme shall be assigned a value for each of

the parameters based on which the risk-o-meter value will be calculated.

2. For the purpose of evaluation of risk level, AUM of the security forming part
of the scheme portfolio shall be as on last day of the given month.

3. The evaluation of risk parameters are as detailed below:

i. Debt securities
a) Credit Risk
 Debt securities of schemes shall be valued for credit risk as
follows:
TABLE 1
Credit rating of the Instrument CREDIT RISK VALUE
G-Sec/AAA/SDL/ TREPS 1
AA+ 2
AA 3
AA- 4
A+ 5
A 6
A- 7
BBB+ 8
BBB 9
BBB- 10
Unrated 11
Below investment grade 12
 Based on the weighted average value of each instrument
(weights based on the AUM), credit risk value of the portfolio shall
be assigned.
 The price of debt instrument to be considered for calculating AUM
shall include the accrued interest i.e. dirty price.
 For the above purpose, credit rating of the instrument as on last
day of the month shall be considered.

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Securities and Exchange Board of India
b) Interest Rate Risk
 Interest rate risk shall be valued using Macaulay Duration of the
Portfolio:
TABLE 2
Macaulay Duration of the portfolio INTEREST RATE RISK
(years) VALUE
≤ 0.5 1
> 0.5 to ≤ 1 2
> 1 to ≤ 2 3
> 2 to ≤ 3 4
> 3 to ≤ 4 5
>4 6
 For the above purpose, Macaulay Duration of an instrument as
on last day of the month shall be considered.

c) Liquidity Risk
 For measuring liquidity risk of the schemes, listing status, credit
rating, structure of debt instruments is considered.
 Liquidity risk of the debt securities shall be valued as follows:
TABLE 3
LIQUIDITY
Instrument
RISK VALUE
TREPS/G-Sec/AAA rated PSU/SDLs 1
Listed AAA rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 2
embedded options*
Listed AA+ rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 3
embedded options*
Listed AA rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 4
embedded options*
Listed AA- rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 5
embedded options*
Listed A+ rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 6
embedded options*
Listed A rated debt securities without bespoke structures/
structured obligations, 7credit enhancements or 7
embedded options*
Listed A- rated debt securities without bespoke
8
structures/ structured obligations, credit enhancements or
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Securities and Exchange Board of India
TABLE 3
LIQUIDITY
Instrument
RISK VALUE
embedded options*
Listed BBB+ rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 9
embedded options*
Listed BBB rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 10
embedded options*
Listed BBB- rated debt securities without bespoke
structures/ structured obligations, credit enhancements or 11
embedded options*
AAA rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 3
 structured obligation
 credit enhancement
 embedded options
AA + rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 4
 structured obligation
 credit enhancement
 embedded options
AA rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 5
 structured obligation
 credit enhancement
 embedded options
AA- rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 6
 structured obligation
 credit enhancement
 embedded options
A+ rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 7
 structured obligation
 credit enhancement
 embedded options
A rated debt securities with any one of the following 8
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Securities and Exchange Board of India
TABLE 3
LIQUIDITY
Instrument
RISK VALUE
features*-
 unlisted
 bespoke structure
 structured obligation
 credit enhancement
 embedded options
A- rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 9
 structured obligation
 credit enhancement
 embedded options
BBB+ rated debt securities within investment grade with
any one of the following features*-
 unlisted
 bespoke structure 10
 structured obligation
 credit enhancement
 embedded options
BBB rated debt securities within investment grade with
any one of the following features*-
 unlisted
 bespoke structure 11
 structured obligation
 credit enhancement
 embedded options
BBB- rated debt securities within investment grade with
any one of the following features*-
 unlisted
 bespoke structure 12
 structured obligation
 credit enhancement
 embedded options
AAA rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 4
 structured obligation
 credit enhancement
 embedded options
AA + rated debt securities with more than one of the
following features*-
 unlisted 5
 bespoke structure
 structured obligation
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Securities and Exchange Board of India
TABLE 3
LIQUIDITY
Instrument
RISK VALUE
 credit enhancement
 embedded options
AA rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 6
 structured obligation
 credit enhancement
 embedded options
AA- rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 7
 structured obligation
 credit enhancement
 embedded options
A+ rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 8
 structured obligation
 credit enhancement
 embedded options
A rated debt securities with more than one of the following
features*-
 unlisted
 bespoke structure 9
 structured obligation
 credit enhancement
 embedded options
A- rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 10
 structured obligation
 credit enhancement
 embedded options
BBB+ rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 11
 structured obligation
 credit enhancement
 embedded options
BBB rated debt securities with more than one of the
12
following features*-
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Securities and Exchange Board of India
TABLE 3
LIQUIDITY
Instrument
RISK VALUE
 unlisted
 bespoke structure
 structured obligation
 credit enhancement
 embedded options
BBB- rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 13
 structured obligation
 credit enhancement
 embedded options
Below investment grade and unrated debt securities 14
*Or any other structure / feature which increase the liquidity risk of the
instrument.
 Liquidity Risk Value of a portfolio shall be assigned based on the
weighted average of such values (weights based on the AUM) of
each instrument.
 For the above purpose, instruments held by the scheme as on
last day of the month shall be considered.

d) Risk value for the debt portfolio shall be simple average of credit risk
value, interest rate risk value and liquidity risk value. However, if the
liquidity risk value is higher than the average of credit risk value,
liquidity risk value and interest rate risk value then the value of
liquidity risk shall be considered as risk value of the debt portfolio.

e) For investment by mutual funds in instruments having short term

ratings, the liquidity risk value and the credit risk value shall be
based on the lowest long term rating of the instrument of the same
issuer as shown above (in order to follow conservative approach)
across credit rating agencies. However, if there is no long term rating
of the same issuer, then based on credit rating mapping most
conservative long term rating shall be taken for a given short term

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Securities and Exchange Board of India
rating.

ii. Equity
a) Market Capitalisation
 Following values shall be assigned to the security for market
capitalisation parameter:
TABLE 4
Market Cap of the underlying MARKET CAPITALISATION
security VALUE
Large cap 5
Mid cap 7
Small cap 9
 The market capitalisation data as published by AMFI on six-
monthly basis shall be considered.
 Based on the weighted average of the above Market
Capitalisation values of each security (weights being AUM of the
security), Market Capitalisation Value of a portfolio shall be
assigned.

b) Volatility
 Following values shall be assigned to the security based on its
volatility:
TABLE 5
Daily Volatility of the Security VOLATILITY VALUE
price (based on the past two years
price of the security)
≤ 1% 5
> 1% 6
 Based on the weighted average of above volatility values of each
security (weights being AUM of the security), Volatility Value of a
portfolio shall be assigned.
If an instrument is traded on multiple stock exchanges, then the
most conservative volatility value across stock exchanges for a
given month shall be considered.

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Securities and Exchange Board of India
c) Impact Cost (Liquidity Measure)
 Impact cost shall be considered as a measure for liquidity. Based
on the average impact cost of the security for previous three
months including the month under consideration following values
shall be assigned:
TABLE 6
Average Impact Cost of the Security for
IMPACT COST VALUE
the month
≤ 1% 5
>1 % to ≤ 2% 7
> 2% 9
 Based on the weighted average of impact cost values of each
security (weights being AUM of the security), impact cost value of
a portfolio shall be assigned.
 If an instrument is traded on multiple stock exchanges, then the
impact cost shall be based on average value of impact costs
across stock exchanges for a given month.

d) For investment in IPOs or recently listed securities, the following

process shall be adopted for arriving at weighted average value for
Risk-o-meter:
 Market Capitalisation value: Market capitalisation of a security as
on the last trading day of the month shall be compared with that
of the market capitalisation of the threshold for large cap, mid cap
and small cap as published by AMFI and then market
capitalisation parameter of risk shall be valued based on the
Table 4 mentioned above.
 Volatility value: For the first three months of trading of a security,
the value for volatility shall be assigned as 6. From the
subsequent months, volatility shall be calculated based on the
available security prices as mentioned at Table 5 above.
 Impact cost value: For the first three months of trading of a
security, the impact cost value shall be assigned as 5. From the

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Securities and Exchange Board of India
subsequent month, impact cost value shall be as mentioned in
Table 6 above.

e) Risk value for equity portfolio shall be simple average of market

capitalisation value, volatility value and impact cost value.

iii. Equity Derivatives

 For hedging positions, the underlying security held and its
corresponding derivative instrument shall not be included for
arriving at risk value. For instance, if XYZ security in cash market
is being hedged by its futures instrument, then the XYZ cash
market security and short futures position in XYZ security both
shall not be considered for arriving at risk value.
 If the quantity of derivative positions taken for hedging purposes
are in excess of the underlying position against which the
hedging position has been taken, the excess position shall be
included while calculating the risk value.

iv. Index Futures and Stock Futures

 For index and stock futures, following values are to be assigned:
TABLE 7
INDEX / STOCK FUTURES
Value for Index / Stock futures
VOLATILITY VALUE
≤ NIFTY near month futures
5
annualized volatility
> NIFTY near month futures
6
annualized volatility
 Based on the weighted average of above values of each security
(weights being AUM of the security), the risk value shall be
assigned to the portfolio.

v. Index Options and Stock Options

 For index and stock options, following values are to be assigned:

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Securities and Exchange Board of India
TABLE 8
INDEX / STOCK OPTIONS’
Value for Index / Stock options
IMPLIED VOLATILITY VALUE
≤ India VIX 5
> India VIX 6
 Based on the weighted average of above values of each security
(weights being AUM of the security), the risk value shall be
assigned to the portfolio.

vi. Other derivative instruments

 If the derivative instrument is used for hedging, then the hedging
instrument shall not be included for calculating the risk value only
if the quantity of derivative instrument is less than or equal to the
quantity of underlying/instrument being hedged. If the derivative
instrument position is in excess of the underlying then the excess
position shall be considered while calculating the risk value.
 If Interest rate swaps (IRS) are being used for hedging purpose,
then IRS shall not be considered for arriving at the risk value.
 For investment in other derivative instruments, such instruments
shall be valued as under:
TABLE 9
Daily Volatility of the instrument VOLATILITY VALUE
≤ 1% 5
>1% 6
 Volatility calculated above is based on daily close prices of past
three months of the instrument.
 Based on the weighted average of above values of each security
(weights being AUM of the security), the risk value shall be
assigned to the portfolio.

vii. REITs & InvITs

 Investment by schemes in REITs and InvITs shall be valued as 7
from risk perspective.

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Securities and Exchange Board of India
 Based on the weighted average of each security (weights being
AUM of the security), the risk value shall be assigned to the
portfolio.

viii. Gold and Gold related instruments:

 Investment in Gold and gold related instruments by schemes
shall be valued as 4 from risk perspective.
 Based on the weighted average of each security (weights being
AUM of the security), the risk value shall be assigned to the
portfolio.

ix. Foreign Securities

 Investment by schemes in foreign securities shall be valued as 7
from risk perspective.
 Based on the weighted average of each security (weights being
AUM of the security), the risk value shall be assigned to the
portfolio.

x. Mutual Fund Schemes:

 For schemes holding units of other mutual fund schemes, the
following values shall be assigned basis the risk-o-meter of
underlying schemes:
TABLE 10
Risk as per risk-o-meter Value
Low 1
Low to Moderate 2
Moderate 3
Moderately High 4
High 5
Very High 6
 The risk value for investment in overseas mutual fund units or
ETFs shall be 7.

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Securities and Exchange Board of India
 Based on the weighted average of each mutual fund scheme held
(weights being AUM of the scheme), the risk value shall be
assigned to the portfolio.

xi. Cash and Net Current Assets:

 Cash and Net Current Assets, shall be valued as 1 from risk
perspective.

4. Risk-o-meter value
 Based on the above calculations, the risk value arrived upon shall
be mapped to the risk level mentioned in the table below and the
same may be depicted in the risk-o-meter:
TABLE 11
Risk Value RISK LEVEL AS PER RISK-O-METER
≤1 Low
>1 to ≤ 2 Low to Moderate
>2 to ≤ 3 Moderate
>3 to ≤ 4 Moderately High
>4 to ≤ 5 High
>5 Very High

5. Illustrations:
In order to illustrate the above process, following are a few illustrations:
A. Debt scheme
 Consider a bond scheme category having 10 debt securities with
following attributes:
o At the portfolio level, the average Macaulay Duration is
1.41
TABLE 12
Securities
held by Weight as Credit
Structure
the % of AUM rating
scheme
AAA -
A 10% No additional feature/structure
PSU
Unlisted and has structured
B 10% AA-
obligation
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Securities and Exchange Board of India
TABLE 12
Securities
held by Weight as Credit
Structure
the % of AUM rating
scheme
C 10% A No additional feature/structure
D 10% BBB+ No additional feature/structure
E 10% AA Has credit enhancement
F 10% AA+ Is bespoke and unlisted
G 10% A No additional feature/structure
H 10% AA No additional feature/structure
I 10% AAA No additional feature/structure
J 10% TREPS -

DEBT- Security A to J

 Based on the above portfolio, following shall be parameter based

valuing of securities held by the scheme:
TABLE 13
Securities
Credit Liquidity
held by Weight as Interest Rate
Risk risk
the % of AUM Risk Value
value value
scheme
A 10% 1 1
B 10% 4 7
C 10% 6 7
D 10% 8 9
E 10% 3 5
F 10% 2 5
G 10% 6 7
H 10% 3 4
I 10% 1 2
J 10% 1 1
TOTAL* 3.5 3 4.8
*Total is calculated as weighted average with weights based
on AUM of the instrument in the scheme as under:

TABLE 14
Parameter Average Value
Credit risk 0.1 X 1 + 0.1 X 4 + 0.1 X 6 + 0.1 X 8 + 0.1 X 3 3.5
+ 0.1 X 2 + 0.1 X 6 + 0.1 X 3 + 0.1 X 1 + 0.1 X
1
IR Risk 1x3 3
LR value 0.1 X 1 + 0.1 X 7 + 0.1 X 7 + 0.1 X 9 + 0.1 X 5 4.8
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Securities and Exchange Board of India
TABLE 14
Parameter Average Value
+ 0.1 X 5 + 0.1 X 7 + 0.1 X 4 + 0.1 X 2 + 0.1 x
1
Simple 3.8
Average

PORTFOLIO RISK-O-METER VALUE:

 Simple average of the above three parameters comes out to 3.8

([3.5+3+4.8]/3)
 Since the liquidity risk value of 4.8 is higher than the average
value of above three parameters i.e. 3.8, the risk value assigned
to the scheme will be 4.8. Hence, the risk level as per Risk-o-
meter is High.
 Therefore, risk-o-meter for the abovementioned debt scheme
would be High, and shall be as depicted below:

B. Equity scheme
 Consider an Equity scheme having 10 equity securities with
following attributes:
TABLE 15
Securities Market Volatility Impact cost
held by Weight as Cap
the % of AUM
scheme
A 10% Large Cap 0.01% 0.2%
B 10% Large Cap 1.5% 0.3%
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Securities and Exchange Board of India
TABLE 15
Securities Market Volatility Impact cost
held by Weight as Cap
the % of AUM
scheme
C 10% Mid cap 2.5% 1.5%
D 10% Mid cap 1.5% 1.2%
E 10% Mid cap 2% 1.9%
F 10% Mid cap 1.5% 1.2%
G 10% Large Cap 0.005% 0.7%
H 10% IPO - -
I 10% Small Cap 1.7% 2.5%
J 10% Cash - -

 Based on the above portfolio, following shall be the scoring of the

securities held by the scheme across parameters:
EQUITY – Security A to I
TABLE 16
Securities
held by Weight as Market Volatility Impact cost
the % of AUM Cap Value Value Value
scheme
A 10% 5 5 5
B 10% 5 6 5
C 10% 7 6 7
D 10% 7 6 7
E 10% 7 6 7
F 10% 7 6 7
G 10% 5 5 5
H* 10% 7 6 5
I 10% 9 6 9
TOTAL 90% 6.6 5.8 6.3

* Assuming the market cap of the security at the time of listing

is falling under Mid cap as per the market cap data published
by AMFI, a value of 7 is considered. Volatility value and
Impact cost value are considered as 6 and 5 respectively.

 The TOTAL mentioned above is calculated as under:

TABLE 17
Parameter Average Value
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Securities and Exchange Board of India
TABLE 17
Parameter Average Value
Market 0.1 X 5 + 0.1 X 5 + 0.1 X 7 + 0.1 X 7 + 0.1 X 7 + 0.1 6.6
Cap X 7 + 0.1 X 5 + 0.1 X 7 + 0.1 X 9
Volatility 0.1 X 5 + 0.1 X 6 + 0.1 X 6 + 0.1 X 6 + 0.1 X 6 + 0.1 5.8
Value X 6 + 0.1 X 5 + 0.1 X 6 + 0.1 X 6
Impact 0.1 X 5 + 0.1 X 5 + 0.1 X 7 + 0.1 X 7 + 0.1 X 7 + 0.1 6.3
cost value X 7 + 0.1 X 5 + 0.1 X 5 + 0.1 X 9
Simple 6.2
Average

 Simple average of the above three parameters comes out to 6.2

[(6.6+5.8+6.3)/3]
CASH – Component J

 Further, cash component is valued as 1.

PORTFOLIO RISK-O-METER VALUE:

 Hence, the average for the total portfolio is 6.2 + 0.1 x 1 = 6.3
 Since the value of risk is higher than 5, it shall fall into range of
Very High Risk.
 Therefore, risk-o-meter for the abovementioned equity scheme
would be Very High, and shall be as depicted below:

C. Multi asset scheme:

 Consider a Multi Asset category scheme having 10 securities with
following attributes:

Page 20 of 23
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Securities and Exchange Board of India
TABLE 18
Type of Securities held Weight as Impact
Market Cap Volatility
security by the scheme % of AUM cost
Equity A 20% Large Cap 0.01% 0.2%
Equity B 10% Large Cap 1.5% 0.3%
Equity C 10% Mid cap 2.5% 1.5%
Weight as Macaula
Type of Securities held Credit
a % of y Structure
security by the scheme rating
AUM Duration
Debt D 10% No
additional
A 2.6
feature/stru
cture
Debt E 10% No
additional
AA 2.1
feature/stru
cture
Debt F 10% No
additional
AAA 2.8
feature/stru
cture
TREPS G 10% - - -
Gold ETF H 10% - - -
REITS I 10% - - -
Interest rate J -20%
swap (IRS)
 As interest rate swap instrument was used for hedging, it is not
included while calculating the risk value.
 Macaulay Duration of debt scheme portfolio (D, E & F) is 2.5
years
 Based on the above portfolio, following shall be the valuing of the
securities held by the scheme across parameters:
TABLE 19
Securities held by Weight as Market Cap Volatility Impact cost
the scheme % of AUM Value Value Value
A 20% 5 5 5
B 10% 5 6 5
C 10% 7 6 7
Interest
Securities held by Weight as a Credit Risk Liquidity
rate risk
the scheme % of AUM value risk value
value
D 10% 6 7
E 10% 3 4
F 10% 1 2
G 10% 1 1

Page 21 of 23
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Securities and Exchange Board of India

EQUITY- Security A, B and C

TABLE 20
Securities held by Weight as Market Cap Volatility Impact cost
the scheme % of AUM Value Value Value
A 20% 5 5 5
B 10% 5 6 5
C 10% 7 6 7

TABLE 21
Parameter Average Value
Market Cap 0.2 X 5 + 0.1 X 5 + 0.1 X 7 2.2
Volatility Value 0.2 X 5 + 0.1 X 6 + 0.1 X 6 2.2
Impact cost value 0.2 X 5 + 0.1 X 5 + 0.1 X 7 2.2
Simple Average 2.2

DEBT- Security D, E, F and G

TABLE 22
Interest
Securities held by Weight as a Credit Risk Liquidity
rate risk
the scheme % of AUM value risk value
value
D 10% 6 7
E 10% 3 4
F 10% 1 2
G 10% 1 1

TABLE 23
Parameter Average Value
Credit risk 0.1 X 6 + 0.1 X 3 + 0.1 X 1 + 0.1 X 1 1.1
IR Risk 0.4 x 4 1.6
LR value 0.1 X 7 + 0.1 X 4 + 0.1 X 2 + 0.1 X 1 1.4
Simple Average 1.37

 For debt component, Simple average of the three parameters

comes out to 1.37.
 Since the liquidity risk value of 1.4 is higher than the average
value of above three parameters i.e. 1.37, the risk value assigned
to the scheme will be 1.4.

Page 22 of 23
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Securities and Exchange Board of India
GOLD and REITS - H and I
TABLE 24
Securities held by Weight as a
Risk Value Value
the scheme % of AUM
H 10% 4 0.4
I 10% 7 0.7

PORTFOLIO RISK-O-METER VALUE:

 The final weighted average risk value for the portfolio is as under:
2.2 + 1.4 + 0.4 + 0.7 = 4.7

 Since the value of risk is higher than 4, it shall fall into range of
High Risk.
 Therefore, risk-o-meter for the abovementioned scheme would be
High, and shall be as depicted below.

Page 23 of 23