Indian market regulator SEBI has proposed a new asset class that could bridge the the gap between Mutual Funds and Portfolio Management Services (MF-PMS) in terms of flexibility in portfolio construction.
Key features
The new asset class would be introduced under the mutual fund structure, would have a minimum investment of Rs 10 lakh.
The new asset class will have a risk-return profile between that of MFs and PMS, which means it will be aimed at investors who have greater risk-taking capabilities and higher investment amounts than in MFs, but lower than in PMS.
This threshold shall deter retail investors from investing in this product, while attracting investors, with investible funds between INR 10 lacs – INR 50 lacs, who are today being drawn to unauthorized and unregistered portfolio management service providers
Because of the gap between investment opportunities available in MFs and PMS, some investors in the segment are getting drawn towards unauthorised investment avenues.
The new asset class will help in curbing the proliferation of unregistered investment products.
Portfolio Management Services (PMS)
Portfolio Management Services are a category of professional financial services in which a skilled portfolio manager and stock market manager provides customised investment solutions to high net-worth individuals (HNIs).
The minimum investment limit in PMS is Rs 50 lakh.
PMS are different from MFs, where the minimum investment limit is just Rs 100, and a pool of money is managed by a professional fund manager.
