Why in news
SEBI has proposed a new product or asset class, designed to fill the gap between Mutual Funds (MFs), Portfolio Management Services (PMS).
It targets investors who can invest more than ₹500 (minimum for MFs) but less than ₹50 lakh (minimum for PMS).
New Product
The new product will cater to investors who want a higher-risk portfolio than MFs but with a lower ticket size than PMS, starting at ₹10 lakh.
The new product aims to offer a professionally managed, regulated investment option with higher risk capabilities while maintaining safeguards to protect investors from unregistered schemes.
It will allow higher risk-taking than MFs, including long-short equity strategies (betting on both rising and falling stock prices).
More flexibility in portfolio management, such as higher limits on debt and equity exposure (e.g., 20% limit on debt securities, 15% on equity exposure per firm).
Strategy Examples
Long-Short Equity Fund: Takes both long (buying) and short (selling borrowed stocks) positions to generate returns.
Inverse ETF/Fund: Generates returns that are negatively correlated to an index’s performance (i.e., profits when the index falls).
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