Proposed New Consultation Paper By SEBI On Asset Class for Risk-Taking Investors
In a significant move to reshape the investment landscape, the Securities and Exchange Board of India (SEBI) has proposed a new asset class that promises to bridge the gap between Mutual Funds (MFs) and Portfolio Management Services (PMS). This initiative aims to provide investors with a regulated yet flexible investment product that allows greater risk-taking, including the ability to invest in derivatives beyond mere hedging and rebalancing.
A Fresh Approach to Investment
The traditional mutual fund space, known for its relatively safer investment avenues, is about to get a dynamic makeover. SEBI’s consultation paper, released on July 16, lays out a comprehensive framework for this new asset class. With a minimum investment threshold of Rs 10 lakh, this new product is designed to cater to high-net-worth individuals who seek more adventurous investment strategies without stepping into the unregulated PMS domain.
Here Is A Point-Wise Summary
SEBI has proposed a new asset class to bridge the gap between Mutual Funds (MFs) and Portfolio Management Services (PMS).
This new asset class allows for investment in derivatives beyond just hedging and rebalancing.
The minimum investment required is set at Rs 10 lakh.
This initiative targets high-net-worth individuals and aims to deter retail investors.
It seeks to curb the proliferation of unregistered and unauthorized investment products.
The cumulative gross exposure, including derivatives, should not exceed 100% of the net assets.
Exposure through exchange-traded derivatives is capped at 50% of net assets.
Single stock derivative exposure should not exceed 10% of net assets.
Index funds and ETFs under this asset class are exempt from the 50% derivative exposure limit.
This asset class offers regulated, high-risk investment opportunities without the higher thresholds of PMS and AIFs.
The high entry barrier ensures only serious, high-net-worth investors participate.
This move encourages asset managers to create innovative investment solutions.
Wealth managers are prompted to deepen their expertise with this new offering.
SEBI’s proposal promises a dynamic, regulated investment environment for India’s high-net-worth investors.
Conclusion
SEBI’s proposal marks a transformative moment for India’s investment landscape, promising to create a robust and dynamic environment for high-net-worth individuals seeking higher risk and higher reward opportunities. As the regulatory framework evolves, this new asset class is poised to become a pivotal part of the investment portfolio for India’s wealth creators, offering them a unique blend of flexibility, innovation, and regulated security.
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