SEBI Board Meeting: New Asset Class Gets Nod, Minimum Investment Limit Set As Rs 10 Lakh

The Securities and Exchange Board of India, in its board meeting held on Monday, approved the introduction of a new asset class under the mutual funds category. The market regulator has set a minimum investment limit of Rs 10 lakh per investor for new products offered by asset management companies, according to a statement.

Offerings under the new product will be referred to as "investment strategies" to maintain a clear distinction from the schemes offered under the traditional mutual funds, it said.

"The minimum investment limit for the new product will be Rs 10 lakh per investor across all investment strategies of the new product in a particular AMC," SEBI added.

Currently, mutual fund schemes are retail-orientated with a low ticket size, while portfolio management services and alternative investment funds have a minimum investment value of Rs 50 lakh and Rs 1 crore, respectively.

The new product under mutual funds is intended to add depth and variety to the investment landscape of the country through a new asset class, according to SEBI.

The announcement came following the conclusion of SEBI's board meeting under the chairpersonship of Madhabi Puri Buch in Mumbai.

For the introduction of the new investment product under the existing mutual fund framework, SEBI's board has approved amendments to SEBI (Mutual Funds) Regulations, 1996.

"The new investment product is intended to bridge the gap between mutual funds and portfolio management services in terms of flexibility in portfolio construction," it said.

The new product also aims to curtail the proliferation of unregistered and unauthorised investment schemes and entities, "which often promise unrealistic high returns and exploit investors expectations for better yields, leading to potential financial risks," the market watchdog noted.

The new product aims to provide investors with a professionally managed and well-regulated product that offers "greater flexibility, higher risk-taking capabilities for higher ticket sizes, while ensuring that appropriate safeguards and risk mitigation measures are in place,"  it noted.

For instance, safeguards for the new product will include "no leverage, no investment in unlisted and unrated instruments beyond those already permitted for mutual funds and derivatives exposure limited to 25% of the assets under management for purposes other than hedging and rebalancing,"  SEBI explained.