Mutual Fund Rules Changed: 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 aim is to give new options to investors and make the investment market better.
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What is Specialized Investment Fund (SIF)?
SEBI has introduced Specialized Investment Fund for high-risk investors. Under SIF, Asset Management Companies (AMC) will be allowed to implement modern investment strategies. These funds will be offered for open-ended schemes and closed-ended schemes. A 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 SIF from mutual fund schemes will have to be ensured. Its objective is to promote investor protection and transparency.
Mutual Fund Lite (MF Light)
SEBI has introduced a ‘mutual fund lite’ framework for index and exchange traded fund (ETF) schemes of mutual funds. Its aim is to simplify the investment process, encourage new players and broaden the investment market.
What are the main features
Rules have been made easier for new asset management companies (AMC). AMC will have to maintain a net worth of at least Rs 35 crore initially. This net worth will be reduced to Rs 25 crore for companies that make profits for 5 consecutive years. MF Lite will increase liquidity in the market and investors will get more options.
Purpose of the new rules
The new schemes will provide investors with opportunities for better returns. MF Lite will bring more liquidity into the market and diversification in investment will increase. The new products will put a stop to unauthorized investment schemes, which often promise impractical returns. These changes by SEBI will reduce the difference between mutual funds and portfolio management. Investors will now have more options and will be able to invest in schemes according to their risk. This move by SEBI will increase transparency in the investment market and will help in attracting new investors.
