Market regulator SEBI has amended the mutual fund rules and introduced new investment products. Under this, a liberalized ‘mutual fund lite’ framework has been introduced under the schemes related to index and exchange traded funds along with specialized investment funds for investors capable of taking high risk. This means that these products have been designed according to the investor.
Specialised Investment Funds (SIFs) allow mutual funds to introduce modern investment strategies. These will be for open ended schemes, closed ended schemes etc. This is expected to broaden and diversify the investment landscape in the country.
Investment of minimum Rs 10 lakh
The Securities and Exchange Board of India (SEBI) said in a notification that a minimum investment of Rs 10 lakh per investor can be made in all investment strategies of the new product in the respective asset management company (AMC). This does not include accredited investors. SEBI has emphasized on separate branding, transparency and investor protection for these funds. The new product aims to bridge the gap between mutual funds and portfolio management services.
The aim is to reduce the risk.
The aim of this new product of SEBI is to reduce the spread of unregistered and unauthorized investment schemes. Such schemes often promise impractically high returns. They take advantage of investors’ expectations for better returns, which creates potential financial risks. SEBI said that asset management companies will ensure that ‘Specialized Investment Fund’ has a different identity from Mutual Fund. That is, a clear difference should be maintained between the new scheme and the offering of the mutual fund.
Big net worth of companies is also necessary.
The market regulator has introduced liberalised mutual fund lite (MF Lite) under mutual fund’s index and exchange traded fund related schemes (passively managed funds). The aim of this framework is to promote ease of entry, encourage new units, reduce compliance requirements, increase penetration,
increase liquidity in the market, facilitate investment diversification and promote innovation. SEBI said in the notification that the mutual fund lite ‘asset management company’ must have a net worth of at least Rs 35 crore for investing in assets. It can be reduced to Rs 25 crore if there is profit for five consecutive years.
