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SEBI Chief Explores Creation of New Asset Class for High-Risk Investors
SEBI Chief Explores Creation of New Asset Class for High-Risk Investors
SEBI’s Chief, Madhabi Puri Buch, has indicated that the capital markets regulator is looking into the creation of a new asset class that would lie between mutual funds and portfolio management services (PMS). This new product is intended to cater to high-risk investors and provide an intermediate investment option. The industry body, Association of Mutual Funds in India (AMFI), has clarified that the idea of introducing this new asset class is at a “very nascent stage.” Additionally, SEBI has been discussing the total expense ratio (TER) within mutual fund schemes and has floated a consultation paper proposing a uniform TER across mutual fund schemes to enhance transparency in costs.
Key Takeaways:
- SEBI is considering the creation of a new asset class positioned between mutual funds and portfolio management services (PMS) to cater to high-risk investors.
- The idea of introducing this new asset class is in the early stages, as clarified by the industry body, AMFI.
- SEBI has been discussing the total expense ratio (TER) within mutual fund schemes and has floated a consultation paper proposing a uniform TER across mutual fund schemes to enhance transparency in costs.
That the Securities and Exchange Board of India (SEBI) is considering the creation of a new asset class that would lie between mutual funds and portfolio management services (PMS). This new asset class is intended to cater to high-risk investors and provide an intermediate investment product between mutual funds and PMS.
SEBI’s Consideration of a New Asset Class
SEBI’s Chief, Madhabi Puri Buch, mentioned that there is a spectrum of asset classes for investors, with mutual funds catering to retail investors, PMS serving as an intermediate option, and alternative investment funds (AIF) for private equity. The idea of introducing a new asset class between mutual funds and PMS is being explored by SEBI, and it is stated that the regulator is looking into the possibility of creating this new asset class.
Industry Response and Consultation
The mutual funds industry body, Association of Mutual Funds in India (AMFI), clarified that the concept of introducing a new asset class between mutual funds and PMS is at a “very nascent stage.” There has been deliberation within the industry regarding an instrument that caters to investors seeking an intermediate investment product between mutual funds and PMS.
Total Expense Ratio (TER) and Consultation Paper
SEBI’s consideration of a new asset class is accompanied by discussions on the total expense ratio (TER) within mutual fund schemes. In May, SEBI floated a consultation paper proposing a uniform total expense ratio across mutual fund schemes to enhance transparency in the costs charged to unitholders. The regulator mentioned that a lot of backtesting and co-creation is taking place in relation to the TER.
In summary, SEBI is exploring the creation of a new asset class to cater to high-risk investors, positioned between mutual funds and PMS. This initiative is part of a broader discussion on enhancing transparency in costs and providing more options for investors.
FAQ
Q1: What is the purpose of SEBI’s consideration of a new asset class between mutual funds and PMS?
A1: The new asset class is intended to cater to high-risk investors and provide an intermediate investment option.
Q2: What is the status of the idea of introducing this new asset class according to the industry body, AMFI?
A2: The concept is at a “very nascent stage,” as clarified by AMFI.
Q3: What other initiative has SEBI been discussing in relation to mutual fund schemes?
A3: SEBI has floated a consultation paper proposing a uniform total expense ratio (TER) across mutual fund schemes to enhance transparency in costs.
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