SEBI plans to introduce new asset class for high-risk investors
The Securities and Exchange Board of India (SEBI) is looking into creating a new investment asset class for those with a high-risk appetite, according to SEBI chairperson Madhabi Puri Buch. This new category would be positioned between portfolio management services (PMS) and mutual funds (MFs). Buch stated that SEBI is discussing the issue with industry stakeholders and exploring the structure of this asset class, as well as the benefits and risk mitigation measures for investors.
Higher minimum investment and relaxed norms
This proposed asset class is anticipated to have a higher minimum investment requirement compared to traditional MFs, along with relaxed norms to generate high returns. In October, SEBI reached out to the Association of Mutual Funds in India (AMFI), seeking the opinions of individual asset management companies (AMCs) on a new MF category. This initiative comes as retail investors increasingly turn to unregistered advisers for high-risk investment strategies, which can result in huge losses.
Roadmap for same-day settlement of trades
Separately, Buch also disclosed that SEBI is working on a plan for same-day settlement of trades by March 2024, followed by an optional parallel system for instant settlement. Currently, trades in India are settled in 'T+1' or one day after the trades are initiated. The proposed 'T+0' system would enable settlements on the same day, ensuring trades are settled immediately. Once implemented, India will be the second country after China to operate on a short settlement cycle of one day.
Easing investments in REITs and InvITs
SEBI is actively engaging with investors, including foreign investors and pension funds, to simplify investments in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). "We think REITs and InvITs are very good products for retail investors as they have the ability to give you inflation-proof income," Buch said. She added that the government would like to get more and more funding from REITs and InvITs, so the market regulator is working with investors to understand their regulatory needs.
What are REITs and InvITs?
On November 28, SEBI approved amendments to REITs Regulations, 2014 in order to create a regulatory framework for facilitating small and medium REITs. REITs are companies that own, operate, or finance income-generating real estate. InvITs operate like MFs but specifically cater to direct investment in infrastructure projects, allowing individuals to invest in operational assets like roads or power plants.
