Capital markets regulator Sebi on Monday cleared a proposal to introduce a new asset class for high-risk profile investors to bridge the gap between mutual funds and portfolio management services in terms of flexibility in asset construction.
The minimum amount of Rs 10 lakh can be invested for the new asset class per investor across all investment strategies of the new product in a particular AMC.
"The new product also aims to curtail the proliferation of unregistered and unauthorised investment schemes/entities, which often promise unrealistic high returns and exploit investors' expectations for better yields, leading to potential financial risks," Sebi said in a press statement after the conclusion of the board meeting.
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The new asset class will provide a regulated product with features like SIP (Systematic Investment Plan), higher risk-taking capability, and a higher ticket size to meet the needs of the emerging category of investors. The higher threshold will deter retail investors from investing in this product while attracting investors with investible funds between Rs 10 lakh and Rs 50 lakh, who are being drawn to unauthorised and unregistered portfolio management service providers.
In its statement, Sebi said that safeguards for the new product will include; no leverage, no investment in unlisted and unrated instruments beyond those already permitted for mutual funds and derivatives exposure limited to 25 per cent of AUM for purposes other than hedging and rebalancing. It further said that offerings under the new product will be referred to as 'Investment Strategies' to maintain a clear distinction from the schemes offered under traditional mutual funds.
"The new product is intended to add depth and variety to the investment landscape of the country through a new asset class," Sebi said.