SEBI to create new asset class between mutual fund, PMS

Capital markets regulator SEBI is looking to create a new asset class—which lies between mutual funds and portfolio management services (PMS)—and the new product can cater to high-risk investors, its chief Madhabi Puri Buch said on Friday.

The SEBI chief said there is a spectrum of asset classes for investors. Of these, "mutual funds are the highly retail investors, then you have in between a PMS and then you have AIF (alternative investment fund) for private equity".

"We feel there is room for an additional asset class somewhere between mutual funds and PMS... SEBI is looking into a whole new asset class," Buch told reporters on the sidelines of a CII event.

In October, mutual funds industry body AMFI clarified that the idea of introducing a new asset class, which lies between mutual funds and PMS, was at a "very nascent stage".

According to the industry body, there was a deliberation within the industry for an instrument that caters to investors who are looking for an intermediate investment product between mutual funds and PMS.

When asked about the total expense ratio (TER), she said that a lot of back-testing is happening and co-creation is happening.

In May, SEBI floated a consultation paper and proposed a uniform total expense ratio (TER) across mutual fund schemes in a bid to bring transparency to the costs charged to unitholders.

TER is a percentage of a scheme's corpus that a mutual fund house charges towards expenses, including administrative and management.