MUMBAI (Reuters) – The Securities and Exchange Board of India (SEBI) is proposing a new asset class that allows investors to take on higher risk through a regulated product, the Indian market regulator said in a consultation paper released on Tuesday.
The asset class would fall between mutual funds meant for retail investors and portfolio management services that are targeted at high-net-worth individuals.
“The proposed New Asset Class seeks to provide investors with a regulated investment product featuring higher risk-taking capabilities and higher ticket size,” SEBI said.
“It is aimed at curbing the proliferation of unregistered and unauthorized investment products,” it added.
Under the new asset class, asset management companies can offer riskier strategies such as long-short equity strategies, which seek to deliver returns by taking long and short positions in equity instruments, or inverse exchange-traded funds that generate returns via an inverse correlation with an underlying index.
These funds will also be allowed to invest in derivatives.
The minimum investment amount for this asset class will be 1 million rupees ($11,961), the regulator proposed.
Fund houses must distinguish these schemes from their mutual fund products and disclose the level of risk associated with the investment strategies, it added.
SEBI has sought comments on its proposal by Aug. 6, before it releases the final guidelines.
($1 = 83.5500 Indian rupees)
(Reporting by Ira Dugal; Editing by Shreya Biswas)
