Sebi looking at creating new asset class between mutual fund and PMS, says Madhabi Puri Buch

SEBI chairperson Madhabi Puri Buch.

The capital market regulator Securities and Exchange Board of India (SEBI) is considering a new asset class that will cater to high-risk investors, SEBI chairperson Madhabi Puri Buch said on December 8.

Moneycontrol wrote on November 25 that the SEBI had initiated the process and put forward the proposal to the Association of Mutual Funds of India (AMFI), the Rs 47 trillion mutual fund industry trade body.

Buch was speaking at the CII Global Economic Policy Forum in Delhi.

The market regulator has been concerned about retail investors seeking unsolicited advice. They often turn to unregistered advisers who run illegal or quasi Portfolio Management Services (PMS) in the garb of investment advice and end up putting their money in risky investments or strategies.

As equity markets have surged in the last few years, retail investors have entered the market in big numbers especially after the coronavirus outbreak.

Many of the investors haven't seen market cycles and fall prey to unregistered investment advice. In the race to earn higher returns, they also adopt risky strategies.

While you can make an investment in a mutual fund (MF) scheme for as little as Rs 5,000 (or even Rs 100 if you invest through a systematic investment plan), you need at least Rs 50 lakh for a PMS and Rs 1 crore to participate in an Alternate Investment Fund (AIF).

Typically, PMS and AIFs have riskier but high-return-high-risk strategies. Since the minimum threshold is far higher than that of a MF scheme, some retail investors opt for high-risk schemes run by unregistered advisers.

Industry insiders earlier told Moneycontrol that if such a new high-risk category is put within the ambit of a MF scheme, it can be regulated the way the mutual fund segment is by SEBI.