In a major move, the market regulator Sebi has prohibited mutual fund schemes to invest in pre-IPO placements of equity shares and related instruments. However, MFs are being allowed to make investment in the Anchor Investor portion or the public issue of an Initial Public Offering (IPO).

Sebi’s clarification came amdist demands by several queries asking on whether mutual funds could participate in pre-IPO placements before the opening of anchor or public issue.

Some MF managers look for pre-IPO to make investments and generate alpha returns which are usually gained by private investors.

According to Moneycontrol report, Sebi sent a letter to the Association of Mutual Funds in India (AMFI) and highlighted that Clause 11 of the Seventh Schedule of the SEBI (Mutual Funds) Regulation, 1996

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