The Securities and Exchange Board of India (Sebi) has approved a new asset class aimed at high-risk investors. This initiative seeks to fill the gap between mutual funds and portfolio management services by offering more flexibility in asset construction. Investors can participate with a minimum investment of Rs 10 lakh across all strategies within a specific Asset Management Company (AMC).

The introduction of this asset class is also designed to address the issue of unregistered and unauthorised investment schemes. These schemes often promise high returns, exploiting investor expectations and posing financial risks. Sebi highlighted these concerns in a press statement following their board meeting.

Investment Strategies and Safeguards

This new product will be marketed as “Investment Strategies” to differentiate it from traditional mutual fund schemes. It aims to provide a regulated option with features like Systematic Investment Plans (SIPs), higher risk tolerance, and larger investment sizes. This caters to an emerging group of investors seeking such opportunities.

Sebi has outlined several safeguards for this new product. These include prohibiting leverage, restricting investments in unlisted and unrated instruments beyond those allowed for mutual funds, and limiting derivatives exposure to 25% of Assets Under Management (AUM) for non-hedging purposes.

Target Audience and Market Impact

The higher investment threshold is intended to discourage retail investors while attracting those with investible funds ranging from Rs 10 lakh to Rs 50 lakh. This group is often drawn to unauthorised portfolio management services due to the lack of suitable alternatives.

Sebi believes that this new asset class will enrich the country’s investment landscape by adding depth and variety. The focus is on providing a regulated environment that meets the needs of high-risk investors while maintaining market integrity.

By introducing this product, Sebi aims to offer a structured investment avenue that aligns with investor expectations for higher returns without compromising on regulatory oversight. This move is expected to enhance investor confidence and contribute positively to the capital markets.