SEBI issues norms for specialised investment fund for MFs, effective Apr 1
This story was originally published at 19:52 IST on 27 February 2025
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MUMBAI – The Securities and Exchange Board of India, in a circular Thursday, issued a regulatory framework for specialised investment funds. The product has been introduced to bridge the gap between mutual fund schemes and portfolio management services in terms of flexibility, creating the opportunity for a new investment product, the regulator said. The circular will be effective from Apr. 1.
The circular also urged stock exchanges to put in place necessary systems for implementation of the guidelines and to make amendments to the relevant bye-laws.
As per the guidelines, a mutual fund which has been in operation for at least three years and has had average assets under management of not less than INR 10 billion in the past three years can launch a specialised investment fund.
Fund houses can also launch a specialised investment fund if the chief investment officer for the fund has at least 10 years of fund management experience and has managed average assets under management of not less than INR 50 billion, and the additional fund manager has at least three years of experience and has managed average assets under management of not less than INR 5 billion.
Asset management companies can share resources for operations across their mutual fund schemes and specialised investment fund. Fund houses will have to file an application with SEBI to launch a specialised investment fund. The investment strategy information document has to include a scenario analysis depicting the expected loss to the investor due to market movements. The Association of Mutual Funds in India, in consultation with SEBI, will come out with a model format for the scenario analysis before Mar. 31.
The minimum investment threshold of INR 1 million will apply exclusively to investments under specialised investment funds and will not include investments made by the investor in regular mutual fund schemes. Under the new fund, the asset management company can offer systematic investment plan, systematic withdrawal plan, and systematic transfer plan options.
The various equity-oriented investment strategies for a specialised investment fund are:
Category of Investment Strategy | Characteristics |
Equity Long-Short Fund | Minimum investment in equity and equity-related instruments: 80%
Maximum short exposure through unhedged derivative positions in equity and equity-related instruments: 25% |
Equity Ex-Top 100 Long-Short Fund | Minimum investment in equity and equity-related instruments of stocks excluding top 100 stocks by market capitalization: 65%
Maximum short exposure through unhedged derivative positions in equity and equity-related instruments of stocks other than large caps: 25% |
Sector Rotation Long–Short Fund | Minimum investment in equity and equity-related instruments of maximum 4 sectors: 80%
Maximum short exposure through unhedged derivative positions in equity and equity-related instruments: 25% |
The debt-oriented and hyrbrid strategies are as follows:
Category of Investment Strategy | Characteristics |
Debt Long-Short | Investment in debt instruments across duration, including unhedged short exposure through exchange traded debt derivative instruments |
Sectoral Debt Long-Short Fund | Investment in debt instruments of atleast two sectors, with maximum investment of 75% in a single sector.
Maximum short exposure through unhedged derivative positions in debt instruments: 25% |
Active Asset Allocator Long Short Fund | Dynamic investment across following asset classes: Equity, debt, equity and debt derivatives, REITs/InVITs and commodity derivatives.
Maximum short exposure through unhedged derivative positions in equity and debt instruments:25% |
| Hybrid Long-Short Fund | Minimum investment in equity and equity related instruments: 25% Minimum investment in debt instruments: 25% Maximum short exposure through unhedged derivative positions in equity and debt instruments: 25% |
In order to avoid proliferation of investment strategies, only one investment strategy will be permitted to be launched under each of the categories mentioned. End
Reported by Kshipra Petkar
Edited by Rajeev Pai
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