Sebi To Introduce New Asset Class To Bridge Gap Between PMS and MFs

Market regulator SEBI is shaking things up with a brand-new asset class designed to fill the gap between mutual funds and portfolio management services or PMS.
For those not familiar with the difference, PMS is a service where professional money managers handle your investments, often tailoring the portfolio to individual needs.
This is different from mutual funds, which pools money from many investors to buy a diversified set of assets.
Typically, PMS requires a minimum investment of ₹50 lakh, whereas mutual funds have much lower entry points, often as low as ₹100.
So what will be the minimum investment for this new asset class?
Just ₹10 lakh-that's one-fifth of the entry cost for PMS schemes.
While this amount is still significant, it’s aimed at attracting those with investible funds between ₹10-50 lakh who might otherwise turn to unregistered portfolio managers.
SEBI’s goal with this move is to deter investors from using unregistered and unauthorized investment services, providing a safer and more regulated option.
In line with this, SEBI is also increasing scrutiny on unregistered investment advisors and taking decisive stern action against them. This includes conducting thorough investigations, issuing warnings, imposing fines, and even banning entities from operating in the securities market.
This new offering SEBI plans to introduce will come under the mutual fund structure but with a fresh look and some relaxed rules.
Mutual funds with asset under management of ₹10,000 crore that have been in operation for three years can offer the asset class.
New or existing mutual funds not meeting these conditions can also offer the asset class, provided they appoint a chief investment officer who manages over ₹5,000 crore in AUM and has ten years of experience.
According to media reports and industry experts, the asset class can take exposure in derivatives for purposes other than hedging and portfolio rebalancing, subject to certain conditions.
Investment strategies that can be offered include long-short equity funds and inverse ETFs that generate returns negatively correlated to the underlying index. Facilities such as systematic investment plans and systematic withdrawal plans will also be available.
So, get ready for a fresh and exciting investment option that combines the best of mutual funds and PMS, offering more choices and flexibility for savvy investors looking to diversify their portfolios
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