SEBI proposes a new asset class for high-risk-taking investors

On Tuesday, the Securities and Exchange Board of India (SEBI) proposed a new asset class for investors with higher risk-taking capabilities. The move is aimed to bridge the gap between mutual funds and portfolio management services (PMS).

What is the proposed new asset class?
In its consultation paper, SEBI stated that the new asset class would have a pooled fund structure similar to mutual funds but a larger ticket size, like PMS. That means the minimum investment under the new asset class, as proposed by SEBI, will be Rs 10 lakh. That said, investors can opt for systematic plans, such as a systematic investment plan (SIP), a systematic withdrawal plan (SWP), and a systematic transfer plan (STP).

"At no point in time should the total invested amount of an investor fall below Rs 10 lakh due to actions of the investor, such as withdrawals or systematic transactions, etc. However, the total amount may fall below Rs 10 lakh due to depletion of the value of investments," said the market regulator.

It also stated that the new asset class will include only SEBI-specified 'investment strategies'. Some such strategies are long-short equity funds, inverse exchange-traded funds (ETFs) or funds, and derivatives or derivative strategies.

The new asset class will also be similar to mutual funds in taxation, wherein investors do not incur any tax until they sell their investment.

If the above proposal is accepted, this will be an innovation in the Indian mutual fund industry. Comments on the above proposal can be given to SEBI by August 6, 2024.