Mutual Fund Regulations : The Securities and Exchange Board of India (SEBI) has announced guidelines for the creation of a new asset category named ‘Special Investment Fund’. It seeks to connect mutual funds with portfolio management services.
As per an official gazette released on Monday (December 16), the minimum investment threshold for SIF, set to receive regulatory approval in September this year, will be Rs 10 lakh. With the introduction of the new asset category, mutual funds will be permitted to initiate open-ended, closed-ended, and interval investment approaches, clearly indicating the subscription and redemption frequencies in the offer document. As per media reports, no fund under the SIF will allocate over 20% of its NAV to debt instruments, which includes money market instruments from a single issuer and non-money market instruments rated above investment grade by a credit rating agency. Nonetheless, the investment cap may be raised to 25 percent of the NAV of the investment strategy with the consent of the board of trustees and the board of directors of the asset management firm.
As per the announcement, the 20 percent cap will not be applicable to investments in government securities, treasury bills, and tripartite repos on government securities or treasury bills.
“The notification stated that no specific investment fund may hold over 15 percent of the paid-up capital of any company with voting rights, across all its investment strategies.”
Net worth may be lowered
No schemes under SIF will be permitted to invest over 10 percent of their NAV in equity shares and equity-related instruments from any company. The regulator stated that a mutual fund lite asset management firm must possess a net worth of no less than Rs 35 crore invested in assets. If the firm earns profit for five straight years, the net worth may be lowered to Rs 25 crore.
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