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The Securities and Exchange Board of India (SEBI) has taken a significant step towards expanding investment options for Indian investors by proposing a new asset class. This move aims to bridge the gap between mutual funds (MFs) and portfolio management services (PMS), catering to investors with investible funds ranging from Rs 10 lakh to Rs 50 lakh.
Key features of the new asset class
- Higher risk, higher returns: The new asset class will offer investors the opportunity to invest in products with higher risk-taking capabilities, potentially leading to higher returns.
- Minimum investment threshold: To deter retail investors and target a specific investor profile, SEBI has proposed a minimum investment of Rs 10 lakh per investor.
- Flexibility in investment: The new asset class will allow for investments in derivatives, beyond hedging and rebalancing purposes, providing greater flexibility to fund managers.
- Eligibility criteria: To ensure expertise and financial stability, SEBI has outlined stringent eligibility criteria for mutual fund houses to launch this new asset class.
The introduction of this new asset class is a strategic move by SEBI to address the proliferation of unregistered and unauthorized investment products in the market. By offering a regulated and transparent investment avenue, SEBI aims to protect investor interests.
While the proposal has been met with positive responses from the industry, experts have raised concerns about the eligibility criteria and the potential need to include PMS providers in the framework. Expanding the pool of eligible managers could enhance competition and benefit investors.
The new asset class is expected to introduce a new era of investment options for Indian investors, offering greater customization and potentially higher returns. However, investors are advised to exercise caution and conduct thorough research before investing in such products.