Specialised investment funds: Sebi sets ₹10 lakh minimum threshold for investors | Mint

India’s markets regulator has set a minimum investment threshold of ₹10 lakh for investing in specialised investment funds (SIF), a new asset class that allows mutual funds to offer advanced investment strategies to investors.

Accredited investors, however, are exempt from this requirement, as per the Securities and Exchange Board of India’s framework for SIFs introduced on Tuesday.

Mutual funds can launch investment strategies in open-ended, close-ended, and interval structures for specialised investment funds, allowing them to cater to a broader set of investors with diverse risk appetites and investment horizons.

For investors, SIFs present an opportunity to diversify their portfolios while navigating a structured and transparent investment framework.

Launching new investment strategies under SIFs will follow the same procedure as mutual fund schemes. Strategies can adopt open-ended, close-ended, or interval structures, with clear disclosures on subscription and redemption frequency. Fees and expenses for these strategies must align with mutual fund regulations.

Minimising risks

To maintain risk controls, Sebi has set strict limits on an SIF’s exposure to single issuers, companies, and sectors.

For debt instruments, no more than 20% of an SIF’s net asset value (NAV) can be invested in securities issued by a single issuer with an investment-grade rating. This limit can be extended to 25% with approval from a fund’s board of trustees and asset management committee. Currently, mutual funds cannot invest more than 10% in a single debt instrument.

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Similarly, equity investments face specific limits. No strategy under the SIF umbrella can invest more than 10% of its NAV in the equity shares or equity-related instruments of a single company. Furthermore, the ownership of a company’s paid-up capital with voting rights is capped at 15% across all SIF strategies. In mutual funds, this limit is capped at 10% of a single company.

This is to ensure that SIFs do not concentrate their holdings excessively in any single entity, minimising systemic risks.

Ensuring investor awareness

To ensure transparency and investor awareness, Sebi has emphasized the need for a distinct identity for SIFs, separate from other mutual fund offerings.

Fund managers overseeing SIFs must hold relevant certifications from the National Institute of Securities Markets as specified by Sebi. Moreover, asset management companies must adhere to Sebi’s stipulations on branding, advertising, disclaimers, and website maintenance.

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Sebi has also mandated comprehensive disclosures in SIFs’ offer documents. These documents must provide sufficient information to help investors make informed decisions, including highlighting the high-risk nature of these funds. Additionally, SIFs must comply with Sebi’s portfolio disclosure norms, ensuring transparency in reporting formats and timelines.

Reits and InvITs

Sebi also introduced restrictions on investments in real estate investment trusts (Reits) and infrastructure investment trusts (InvITs).

Total investments in Reits and InvITs cannot exceed 20% of their NAV, with a cap of 10% per issuer. Additionally, the total ownership of units issued by a single issuer across strategies cannot exceed 20%. However, index funds and sector-specific schemes are exempt from these limits.

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