Sebi introduced a new asset class for high-net-worth investors (HNIs), allowing them to invest in regulated, higher-risk products. This new offering, known as ‘Investment Strategies,’ sets a minimum investment threshold of Rs 10 lakh and aims to provide a structured alternative to traditional mutual funds.
The goal of this product is to expand India’s investment landscape by offering strategies similar to those available in markets like the U.S. and Australia. Only mutual funds with at least Rs 10,000 crore in assets or those managed by experienced fund managers will be eligible to offer these products, ensuring professional management and oversight.
A key feature of this new class is its emphasis on risk management. Total gross exposure, including derivatives, will be capped at 100% of net assets. Additionally, the product will have strict limits on leverage and investment in unlisted and unrated instruments. Derivative exposure beyond hedging and portfolio rebalancing will be limited to 25% of assets under management (AUM).
The introduction of this asset class is part of SEBI’s broader effort to curb unregistered and unauthorized schemes that promise unrealistic returns and pose financial risks to investors. “This product will provide a well-regulated, professionally managed option with higher risk-taking capabilities, while ensuring strong safeguards are in place,” SEBI noted in its release.
Madhu Nair, CEO of Union MF, sees potential in the new product due to favorable tax treatment, making it an attractive, differentiated option for HNIs. Similarly, Jimmy Patel, CEO of Quantum MF, believes the flexibility in derivative exposure will appeal to HNIs, offering them a more diverse multi-asset product.
However, Daniel GM, Founder-Director of PMS Bazaar, cautioned that while the product could attract mutual fund investors, its true value will depend on how it distinguishes itself from existing investment structures in the market. “We will have to wait and see what unique benefits this new asset class brings to investors,” he said.
This move by SEBI aims to provide HNIs with a flexible, higher-risk product while ensuring that strong regulatory controls remain in place.