Introduction of Specialised Investment Funds by SEBI
The Securities and Exchange Board of India (SEBI) has unveiled a new investment option designed to bridge the gap between mutual funds and portfolio management services (PMS). This innovative product, known as ‘Specialised Investment Funds’ (SIF), requires a minimum investment of Rs 10 lakh, offering investors access to more sophisticated investment strategies.
Diverse Investment Strategies
Specialised Investment Funds will provide a variety of investment strategies, including exposure to equities, debt instruments, real estate investment trusts (REITs), and derivatives such as futures and options (F&O). Depending on the specific strategy adopted by the asset management company (AMC), SIFs may present a risk-return profile that is more aggressive than that of a standard equity fund.
Meeting Investor Demands
There has long been a demand for a product that delivers advanced investment options while remaining more economical than PMS, which typically requires a substantial minimum investment of Rs 50 lakh. The introduction of SIFs seeks to fill this gap, catering to investors who wish for a more dynamic investment experience without the high entry costs.
Structure and Regulations
The SIFs will adopt a structure similar to that of mutual funds, facilitating comparable investment and redemption processes as well as tax benefits for both the investors and the managing fund company. As PMSs have become progressively more intricate, particularly with the individualized management of each investor’s portfolio, SIFs aim to simplify this complexity.
To protect investors’ interests, SEBI has implemented specific limitations for SIFs, such as capping investments at a maximum of 10% in any single listed company and 20% for any debt security issuer. However, investments in government securities (G-Secs) and treasury bills (T-bills) are exempt from these restrictions.
Professional Management
Fund managers overseeing the SIFs will be required to attain certification from the National Institute of Securities Market (NISM). This requirement ensures that managers possess the necessary expertise to navigate complex market conditions effectively.
Enhanced Risk-Return Profile
The SIF structure empowers fund managers to engage in investment strategies that not only aim for superior returns through bold investment choices and unique derivative approaches but also focus on optimizing the risk-return profile by diversifying asset exposure based on current market dynamics.
Fee Structure
As SIFs will operate under a mutual fund framework, their fee structure will be aligned with the regulations governing mutual fund operations. Fees and expenses associated with the investment strategies under SIF will follow Regulation 52 of mutual fund regulations, ensuring transparency and fairness for investors.
Conclusion
The introduction of Specialised Investment Funds by SEBI marks a significant advancement in investment opportunities within the Indian financial landscape. By combining the benefits of mutual funds with the sophistication of portfolio management services, SIFs aim to empower investors, providing them with the tools and strategies needed to navigate an increasingly complex market environment.
