‘Sebi’s proposal on new asset class for high risk takers looks promising’

New Delhi: Capital markets regulator Sebi’s proposal for introducing a new asset class for high-risk profile investors can help them gain access to a newer set of strategies including long-short equity fund and inverse Exchange-traded Fund (ETF).

The new asset class is aimed at bridging the gap between mutual funds and Portfolio Management Services (PMS) in terms of flexibility in portfolio construction. The Sebi’s consultation paper floated on Tuesday on ‘new asset class’ and creating a structure for differentiated, higher risk strategies looks very promising, Radhika Gupta, MD and CEO of Edelweiss Mutual Fund said.

“India is finally opening up to different investment products, styles and approaches. Passive, factor, inverse ETFs, alts and more. There is no single way to invest,” she added.

In its consultation paper, the regulator said the new asset class will provide a regulated product with features like SIP (Systematic Investment Plan), higher risk-taking capability, and a higher ticket size, to meet the needs of the emerging category of investors.

The regulator suggested a minimum investment of Rs 10 lakh for the new asset class, which could be permitted to invest in derivatives for purposes beyond just hedging and rebalancing. This higher threshold will deter retail investors from investing in this product, while attracting investors, with investible funds between Rs 10 lakh and Rs 50 lakh, who are being drawn to unauthorised and unregistered portfolio management service providers,” the regulator said.

“Sebi’s consultation paper for introducing new product classes with higher investment minimum than mutual funds and more freedom to invest can help investors gain access to a newer set of strategies like Long-short equities, inverse ETFs, etc which can help them express specific views on the market,” Kaustubh Belapurkar, Director - Manager Research of Morningstar Investment Research India, said.