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Soon, investors with at least Rs 10 lakh will be allowed to invest in a new asset class, currently referred to as 'Investment Strategies', following regulator SEBI's green light on Monday (September 30, 2024).
Once introduced to the market, 'Investment Strategies' will be a mix of mutual funds and Portfolio Management Services (PMS), catering to more risk-on investors with a higher investment ticket size.
Restrictions on 'Investment Strategies'
However, SEBI has ensured that this is not a freewheeling investment option. To safeguard investors, the regulator has placed certain restrictions on these strategies, including:
a) No leverage
b) No investment in unlisted and unrated instruments beyond those already permitted for mutual funds
c) Limited derivatives exposure (up to 25 per cent of net assets) for purposes other than hedging and rebalancing.
Introducing Mutual Fund Lite framework for passive funds
In another significant move, SEBI introduced the Mutual Fund Lite framework for passively managed schemes. To encourage new entrants in the passive funds' space, the regulator has simplified the process for potential sponsors by relaxing requirements related to net worth, track record and other relevant disclosures.
Additionally, existing fund houses with both active and passive funds will have the option to hive off their passive schemes to a different group entity. This could result in AMCs having two fund houses under a common sponsor.
Last but not least, SEBI has also increased the maximum number of nominees from three to ten for mutual funds.
These decisions come after SEBI released a consultation paper in July where public feedback was sought on Investment Strategies and the Mutual Fund Lite framework.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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