Mutual fund industry exploring a new product with 'flexible norms'

The mutual fund (MF) industry is exploring a new category which will cater to investors who are looking for an intermediate investment product between MFs and portfolio management services (PMS), the Association of Mutual Funds in India (Amfi) said on Friday. “The discussion is at a very nascent stage and will go through the consultative approval process with the regulator,” it stated in a press release.

The clarification was in response to media reports which stated that the Securities and Exchange Board of India (Sebi) has written to Amfi seeking the industry's views on a new 'higher risk' fund category. The plan, according to reports, is to relax certain norms for the new category to allow investments in certain products and deployment of select strategies, which are till now only used by PMS and alternative investment fund managers. However, PMS and AIF are out of bounds for retail investors due to their minimum investment criteria of Rs 50 lakh and Rs 1 crore, respectively.

The MF product, if introduced, will also have a minimum investment threshold but will likely be much lower than that of PMS.

"The intent is to introduce a new asset class which lies between mutual funds and PMS which may have flexible prudential norms, with a certain minimum ticket size. Hence any comparison with AIF / PMS is misplaced," Amfi said.