Putting the “what, when and whether” behind them, the board of capital markets regulator Sebi (Securities and Exchange Board of India) has approved the introduction of a new asset class – referred to as MF Lite – for investors with significant risk appetite.
Broadly classified as a passive scheme, this asset class will help deepen the market with the lure of higher return for deep pocket investors who would fight shy of PMS (portfolio management services) that requires a commitment of at least Rs 50 lakh.
More indices, schemes
“Now one will see an increasing number of products and indices based on indices that investors want. I expect newer firms and new fund managers to enter the fray with MF Lite. It is an extremely positive development for new investors who are testing the market,” investment strategist Nilanjan Dey, director, Wishlist Capital told News9live.
According to Sebi, the regulations for MF Lite framework include relaxations for eligibility criteria for AMCs (asset management companies) on metrics of net worth, track record, responsibility of trustees, approvals.
Trend to become more pronounced
“The number of passive funds is on the rise. Not only is the number of funds on the rise, but the number of indices being creatively crafted is on the rise and there is data to support it. Second, this trend will become more pronounced with time. With this serving as the backdrop, the market regulator has taken steps to relax the norms for passive funds which include index funds, ETFs etc,” Dey added.
Data supports Dey’s opinion. According to a report, between January and July this year, there were as many as 63 passive schemes out of a total 106 NFOs that hit the market.
Constant superior returns difficult
Experts also say that investors are realising that it is virtually impossible for any fund manager to deliver superior returns year after year in actively managed funds.
The trend of creatively designing indices to capture growth trends and convert them into tangible gains is a new development that is aiding the domain of passive funds.
Alternative Investment Funds (AIF) also need a minimum investment of Rs 1 crore. Therefore, there is a yawning gap between PMS and mutual funds that the common man invests in. Clearly, Sebi wants to address the emerging class of investors who want their own niche to flourish.
Experts think the horizon of passive funds is likely to expand in India following the landmark decision of the Sebi board on September 30 to introduce MF Lite. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
