“…the proposed New Asset Class intends to fill the gap between MFs and PMS by offering a regulated product featuring greater flexibility, higher risk-taking capability and a higher ticket size, to meet the needs of the emerging category of investors,” said Sebi in a discussion paper on Tuesday. “The absence of such an investment product appears to have inadvertently propelled the investors of this segment towards unregistered and unauthorized investment schemes/entities,
The new asset class would provide a regulated and structured, while having a distinct nomenclature that will distinguish it from traditional mutual funds and other investment products
“It opens up an array of possibilities to launch new age themes like EV, Water, Recycling, Green energy etc,” said Kunal Valia, Founder, Statlane, an investment advisory. “The ever-growing mass affluent and HNI category can benefit a lot from such a new product class as it enables them to participate in such new age products.”
The new asset class would be introduced under the mutual fund structure, with relaxations in prudential norms, it said. Further, investors would also have an option of systematic plans such as systematic investment plan (SIP) and systematic withdrawal plan(SWP) for investment strategies.
“While such relaxations may enhance the risks associated with the product, the same can be mitigated by putting a higher limit on minimum investment size,” Sebi said.
The new asset class would be able to invest in derivatives or derivative strategies as a way of taking exposure in the market.
“The new product will help investors to benefit from the derivatives market, through professional management,” said Feroze Azeez, Deputy CEO, Anand Rathi Wealth Management.
Sebi said the redemption frequency of these investment strategies can be tailored based on the nature of investments to allow the investment manager to adequately manage liquidity without imposing undue constraints on investors.
The new product will be tax efficient as it will have a mutual fund structure,” said Niranjan Avasthi, Senior Vice President, Edelweiss Mutual Fund. “Existing AIFs and PMS could be at a disadvantage.”
To facilitate existing and newly registered asset management companies (AMCs) to offer products under the new asset class, Sebi has suggested two routes of eligibility criteria — strong track record or alternate route.
On a strong track record, a mutual fund should be in operation for a minimum of three years and have an average asset under management (AUM) of at least Rs 10,000 crore in the preceding three years, and no action should have been taken against the sponsor or AMC in the last three years.
Further, mutual funds not fulfilling the requirement of strong records would also be eligible to launch the new asset class. This is subject to compliance with certain requirements such as AMC should appoint a chief investment officer for the new asset class with experience of fund management of at least 10 years and managing AUM of at least Rs 5,000 crore and an additional fund manager for the such asset class with experience of at least seven years and managing AUM of at least Rs 3,000 crore.
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