SEBI's Proposed New Asset Class for High Risk Takers

SEBI’s Proposed New Asset Class for High Risk Takers

Markets regulator Sebi is proposing a "new asset class", an investment product for rich investors. Check here features and Eligibility Criteria for Offering New Asset Class Products.

Table of Contents

Context: Securities and Exchange Board of India (SEBI) proposed to introduce a new asset class or product category to bridge the gap between mutual funds (MFs) and portfolio management services (PMS).

What is New Asset Class?

Objective: This new category aims to provide a regulated investment product that allows for greater flexibility and higher risk-taking, targeted at a new category of investors seeking alternatives to unregistered and unauthorised investment schemes.
Management: The asset class will be managed under the umbrella of asset management companies (AMCs) and will offer pooled fund structures similar to mutual fund schemes.

Features of SEBI’s New Asset Class

Minimum Investment: The proposed minimum investment amount for this new asset class is Rs 10 lakh per investor.
Investment Options: Investors will have the option to engage in systematic investment plans (SIP), systematic withdrawal plans (SWP), and systematic transfer plans (STP).
Flexible Strategies: The new asset class will allow for a variety of investment strategies, including long-short equity funds—which take long and short positions in equities and equity-related instruments—and inverse ETFs/funds, which aim to generate returns inversely correlated to their underlying indexes.
Redemption Frequency: The redemption frequency will be tailored based on the nature of the investments, allowing investment managers to manage liquidity effectively without imposing undue constraints on investors.

Eligibility Criteria for Offering New Asset Class Products

For Established MFs/AMCs:
- Must have been operational for at least 3 years.
- Must have an average asset under management (AUM) of no less than Rs 10,000 crore in the preceding three years.
- Must not have faced any regulatory action from SEBI against the sponsor/AMC in the last three years.
For New or Non-qualifying MFs/AMCs:
- Can offer products under the new asset class by appointing a Chief Investment Officer (CIO) with at least ten years of fund management experience and managing an AUM of no less than Rs 5,000 crore.
- Additionally, must appoint a fund manager for the new asset class with at least seven years of fund management experience and managing an AUM of no less than Rs 3,000 crore.