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SEBI Proposes to Bring ‘New Asset Class’
Context:SEBI proposes to bring a ‘new asset class’ with a minimum investment limit of Rs 10 lakh per investor.
About the new asset class:
A hybrid investment vehicle for high-net-worth individuals (HNIs) that combines elements of mutual fund plans and portfolio management programs.
- The proposed new asset class offers 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.
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- Aimed at curbing the proliferation of unregistered and unauthorised investment products.
Infrastructure Investment Trusts
- InvITs is a trust (they are called Business Trusts) registered under the Indian Trusts Act, 1882 which manages a fund/ corpus where the funds are invested in infrastructure projects.
- InvITs are mutual fund like institutions that enable investment into the infrastructure sector by pooling small sums of money from multitude of individual/institutional investors. InvITs are regulated by Securities and Exchange Board of India (SEBI).
REITs are the same as InvITs but they invest in commercial real estate projects.
- Current PMS ticket size:Currently, the PMS minimum investment threshold is Rs 50 lakh, while the MF minimum investment threshold is Rs 500 per investor.By setting a minimum investment threshold of Rs 10 lakh, SEBI aims to deter retail investors while attracting those currently drawn to unauthorised PMS providers.
- The regulator has recommended a distinct nomenclature for the new asset class to distinguish it from traditional MFs and other investment products already available in the securities market such as PMS, AIF (alternative investment funds), REITs (real estate investment trust) and INVITs (Infrastructure Investment Trust).
- Sebi has proposed that Asset Management Companies (AMC) can offer investment strategies under pooled fund structure, akin to MF schemes.
- Proposed investment strategies
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- Long-short equity fund — a fund that seeks to deliver returns by taking long and short positions in stock and equity-related instruments .
- Inverse ETF (exchange traded fund)/ — a fund that seeks to generate returns that are negatively correlated to the returns of the underlying index.
- SEBI has set two routes of eligibility criteria for the existing as well as newly registered MFs/ AMCs to be able to offer products under the new asset class.
Exchange traded fund(ETF)
- Exchange Traded Funds (ETF) are index funds that are listed and traded on stock exchanges just like regular shares.
- They are a basket of stocks with assigned weights that reflect the composition of an index.
- The ETFs trading value is based on the net asset value of the underlying stocks that it represents.
- eg.Bharat-22 ETF that will track the performance of 22 stocks of Central Public Sector Enterprises(CPSE), Public Sector Banks(PSB’s ).
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Mutual Fund
Benefits of Mutual Fund
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