Stock market regulator SEBI has introduced new rules for mutual fund investors. The new changes include the framework for Specialized Investment Funds (SIF) and Mutual Fund Light. Their objective is to provide new options to investors and further improve the investment market.
What is Specialized Investment Fund (SIF)?
SEBI has launched Specialized Investment Fund for high risk investors. Under SIF, asset management companies (AMCs) will be allowed to implement modern investment strategies. These funds will be offered for open-ended schemes and closed-ended schemes. Minimum investment of Rs 10 lakh per investor will be mandatory in these schemes. However, this rule will not apply to accredited investors. Apart from this, SEBI has said that separate branding and identity of mutual fund schemes of SIF will have to be ensured. Its objective is to promote investor protection and transparency.
Mutual Fund Lite (MF Light)
SEBI has introduced ‘Mutual Fund Lite’ framework for index and exchange traded fund (ETF) schemes of mutual funds. Its objective is to simplify the investment process, encourage new players and widen the investment market.
What are the main features
Rules have been simplified for new Asset Management Companies (AMCs). AMC will have to initially have a minimum net worth of Rs 35 crore. For companies earning profits for 5 consecutive years, this net worth will be reduced to Rs 25 crore. MF Lite will increase liquidity in the market and investors will get more options.
Purpose of new rules
Investors will get better return opportunities with the new schemes. Through MF Lite, more cash will come into the market and diversity in investment will increase. The new products will prevent unauthorized investment schemes, which often promise impractical returns. These changes of SEBI will reduce the gap between mutual funds and portfolio management. Investors will now have more options and will get the facility to invest in schemes as per their risk. This step of SEBI will increase transparency in the investment market and will help in attracting new investors.
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