New asset class to foster innovation, raise competition

The new asset class proposed by the market regulator, which will fit in between mutual funds (MFS) and portfolio management services (PMS), will open up new business opportunities for domestic asset management companies (AMCs).

- ABHISHEK KUMAR & KHUSHBOO TIWARI

But it may eat into some of the existing assets of MFS and PMS, believe industry experts.

The Securities and Exchange Board of India (Sebi) on Tuesday proposed a new investment vehicle catering to investors willing to take riskier bets. The regulator has mooted a minimum ticket size of 10 lakh, much below the threshold of ₹50 lakh for PMS.

"It is a good opportunity for AMCs as they can have multiple avenues for investors. However, it requires them to develop the necessary expertise. It can eat into some portion of PMS investment, and there will be demands to allow them also to provide this new asset class," said Shiju PV, Senior Partner, IndiaLaw LLP.

Radhika Gupta, MD & CEO, Edelweiss MF, also said that the introduction of the new asset class allows fund houses to build "multiple centres of expertise rather than a single style or individual driven business".