MUMBAI: Markets regulator Sebi has introduced a new asset class, Specialised Investment Funds (SIFs), targeted at high-risk profile investors, along with a liberalised Mutual Funds Lite (MF Lite) framework for passively managed schemes.
The move aims to address gaps in the investment landscape by offering more flexibility and catering to diverse investor needs. SIFs provide a bridge between traditional mutual funds and portfolio management services (PMS), combining the ease of mutual funds with the tailored, sophisticated strategies typical of PMS.
SIFs
The SIF framework allows asset management companies (AMCs) to launch advanced investment strategies in open-ended, closed-ended, or interval structures, catering to investors who can tolerate higher risk.
Key highlights include a minimum investment threshold of Rs10 lakh per investor (except for accredited investors); limits on exposure to single issuers, companies, and sectors to maintain robust risk controls and emphasis on distinct branding, transparency, and investor protection.
By introducing SIFs, Sebi aims to provide a regulated alternative to unregistered and unauthorised investment schemes, which often promise unrealistic returns and pose significant risks to investors.
The structure also ensures flexibility in portfolio construction, offering advanced strategies typically unavailable in traditional mutual funds.
“The Specialised Investment Fund must have distinct identification, separate from that of mutual funds, ensuring clear differentiation between the two products,” Sebi noted in its notification.
Mutual Funds Lite framework
The MF Lite framework is designed to simplify the regulatory environment for passively managed schemes, such as exchange-traded funds (ETFs) and index funds, which track underlying indices and require less active management compared with traditional mutual fund schemes.
The key features include relaxed eligibility criteria for sponsors, including lower net worth, track record, and profitability requirements; simplified approval processes and disclosures.and reduced compliance requirements for entities launching only passive schemes.
Under the new framework, AMCs managing MF Lite schemes must maintain a net worth of at least Rs35 crore, which can be reduced to Rs25 crore if the company has been profitable for five consecutive years.
Why Sebi introduced these changes
Sebi’s initiatives aim to address the evolving needs of investors by offering products with varying levels of risk and management styles. SIFs provide a lighter, more flexible alternative to PMS, catering to high-risk investors seeking advanced strategies in a structured and regulated environment.
Similarly, the MF Lite framework lowers entry barriers and compliance requirements, encouraging new players to enter the market. By promoting passively managed funds, Sebi seeks to increase market penetration, enhance liquidity, foster innovation, and make investing simpler for a broader audience.
The initiatives also aim to curb the rise of unregulated investment schemes, ensuring better protection for investors while expanding the scope of regulated investment products in India.
