With an eye on SIF foray, PMS, AIFs queue up for mutual fund licence

Nuvama Wealth, Marcellus Investment Managers among new MF applicants

Portfolio management services (PMS) players are queuing up for a mutual fund (MF) licence with an eye on the specialised investment funds (SIFs) space.

SIFs are a new product segment within MFs that will compete with PMS and alternative investment funds (AIFs).

 

During the last three months, four prominent players in the PMS and AIF space — Nuvama Wealth Management, Marcellus Investment Managers, Wealth First Portfolio Managers and ASK Investment Managers — have filed applications with the Securities and Exchange Board of India (Sebi) for approvals to foray into MFs.

 

ASK Investment Managers has secured in-principle approval from Sebi. 

“We are making an application for MF licence to Sebi. This is for the SIF. It will allow some of our strategies, which we now deploy on the AIF side, like long-short and absolute return,” Nuvama Wealth had stated in a post-results analyst call on January 30.

SIFs are being seen as a major competitor to PMS and AIFs.

 

While SIFs will be similar to PMS and AIFs to an extent from the product point of view, they will have the tax structure and ticket size advantage. The minimum ticket size for SIFs is ₹10 lakh. In comparison, it is ₹50 lakh for PMS and ₹1 crore for AIFs. 

In addition, SIFs will have the tax advantage as they won't have to pay long-term or short-term capital gains (LTCG and STCG) taxes at the fund level as opposed to category 3 AIFs.

 

In the case of PMS, the investor has to pay taxes on capital gains whenever the fund manager makes a profitable trade.

 

"If this fund (SIF) has a taxation structure which is similar to MFs, which means taxation only on redemption, then I think this vehicle will become extremely efficient for clients. Hence, we want to be one of the first ones to launch under the structure," a Nuvama executive stated during the call.

 

The final SIF regulations, which were announced recently, confirmed that the SIF tax structure will be the same as MFs.

 

Regulations allow SIFs to offer three categories of investment strategies — equity-oriented strategies such as equity long-short funds and sector rotation funds. The others are debt-oriented hybrid strategies. Equity-oriented strategies focus on equity and derivatives, allowing limited short exposure.

 

The equity long-short fund will invest at least 80 per cent in equities with a 25 per cent short limit. The equity ex-top 100 long-short fund excludes largecap stocks while maintaining 65 per cent equity exposure.

 

The sector rotation long-short fund concentrates on a maximum of four sectors.

 

The latest applicants join the long list of other financial services firms waiting for MF licence. The other applicants include Jio BlackRock, Capitalmind, Choice International, and Cosmea Financial Holdings. 

MUSHROOMING MFs

10 players in fray for MF licence

Applicants with partial approvals

 

Jio BlackRock

 

Pantomath Capital Advisors 

Capitalmind Financial Services 

ASK Investment Managers

 

Other applicants

 

AlphaGrep Securities

 

Monarch Networth Capital

 

Marcellus Investment Managers

 

Wealth First Portfolio Managers

 

Nuvama Wealth Management