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The Securities and Exchange Board of India (Sebi) has proposed a new asset class targeted at investors looking for an option between mutual funds and portfolio management services (PMS).
This new category will require a minimum investment of Rs 10 lakh and is designed to offer a regulated product with more flexibility for investors who are comfortable with higher risks. The move aims to provide a safe alternative to unregistered investment products.
Key features of the new asset class include:
* Higher minimum investment: Compared to mutual funds, this new option requires a larger initial investment of Rs 10 lakh.
* Greater flexibility: Investors will have more control over their investment strategy compared to traditional mutual funds.
* Higher risk-taking capability: The new class is suited for investors comfortable with taking on more risk in exchange for potentially higher returns.
* Systematic investment options: Investors may be able to invest through systematic plans like SIP (Systematic Investment Plan) and SWP (Systematic Withdrawal Plan).
* Pooled fund structure: Similar to mutual funds, the new category will pool investments from multiple individuals.
* Tailored redemption frequency: Redemption options will be determined by the underlying investments, allowing for better liquidity management.
* Investment strategies: Some potential strategies include long-short equity funds and inverse ETFs.
Sebi has proposed two routes for existing and new asset management companies (AMCs) to be eligible to offer products under this new class. AMCs with a strong track record (minimum 3 years operation, Rs 10,000 crore average AUM in the past 3 years, and no regulatory action from Sebi) will qualify automatically.
Other AMCs can participate by appointing a Chief Investment Officer (CIO) with at least 10 years of experience managing Rs 5,000 crore in AUM. An additional fund manager with a minimum of 7 years experience managing Rs 3,000 crore in AUM will also be required.
This proposal by Sebi is currently in the consultation phase, and further details are awaited.
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