How-to
side pocket
segregated portfolio
How to handle segregated portfolio (side pocket) units
Segregated portfolio (side pocket) is SEBI’s protective mechanism during credit events. It prevents healthy investors from being penalised by mass redemption during distress.
Conflict-of-interest disclosure. This guide is published by WebNotes Editorial Team for informational purposes. WebNotes has no commercial relationship with any AMC. No affiliate commission is earned.
Market-risk disclaimer. Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Side-pocket recovery is uncertain; partial or zero recoveries are common.
Step-by-step procedure
See the procedure infobox above for the seven steps.
Historical examples
| Year | AMC / scheme | Trigger |
|---|---|---|
| 2019 | Franklin Templeton | Voluntary wind-up (special case) |
| 2018 | Multiple debt funds | IL&FS default |
| 2019 | Multiple | DHFL default |
| 2020 | Multiple | Various credit events |
Tax treatment
Recovery treated as debt MF redemption:
- Post April 2023: slab rate (Section 50AA).
- Pre-2023: depending on holding period.
See also
- How to select debt fund
- How to redeem mutual funds
- How to handle cancelled fund merger MF
- How to handle fund house acquisition
- How to file an AMC complaint (MF)
- How to file SEBI SCORES complaint
- How to report MF capital gains in ITR
- How to download MF SoA
- How to claim segregated portfolio recovery
- Segregated portfolio (MF)
- Side pocket (MF)
- Credit event (MF)
- SEBI segregated portfolio circular 2018
- Section 50AA (debt MF taxation)
- Credit rating (Indian)
- Mutual funds in India
- AMFI
- SEBI
External references
References
- SEBI Circular on Creation of Segregated Portfolio, December 2018.
- SEBI Master Circular for Mutual Funds.
- Income Tax Act, 1961, Section 50AA.
- AMFI Best Practice Guidelines.