Sebi proposes new Asset Class between Mutual Fund and PMS
SEBI, asset class, mutual funds, portfolio management services, higher risk takers, investment, derivatives, consultation paper, investment strategy, regulated investment, unauthorized investment, risk profile, wealth managers. Hedge fund
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SEBI proposes a new asset class for higher risk takers, positioned between Mutual Funds (MFs) and Portfolio Management Services (PMS). A consultation paper released on July 16 suggests a minimum investment of Rs 10 lakh for this class. It aims to bridge the gap between MFs and PMS in portfolio flexibility, allowing investments in derivatives for purposes beyond hedging and rebalancing.
This new asset class seeks to provide a regulated investment product with higher risk-taking capabilities and a higher ticket size to curb unregistered investment products. The minimum investment amount is set to deter retail investors from unregistered PMS, attracting those with investible funds between Rs 10-50 lakh.
Key points on derivatives investment:
Cumulative gross exposure through all instruments, including derivatives, should not exceed 100% of the net assets of the investment strategy.
Total exposure through exchange-traded derivatives should not exceed 50% of net assets, except for index funds or ETFs specified by SEBI.
Exposure through derivatives of a single stock should not exceed 10% of net assets.
Sandeep Jethwani, Co-founder of Dezerv, views this as a significant advancement for India’s investment ecosystem, providing high-risk investors with regulated opportunities without the high thresholds of PMS and AIFs, driving asset managers to create innovative solutions, and encouraging wealth managers to deepen their expertise.