A CLASS APART

Sebi has proposed a new asset class. How far can it quench the risk-taker's thirst?

- ABHISHEK KUMAR

Mumbai-based Mayank Mehta has been investing in mutual funds (MFS) sporadically over the past 10 years. Though he often signs monthly cheques for systematic investment plans (SIPs), he is more inclined towards derivatives. "Most of my MF investments have yielded good returns, but I am more drawn to derivatives trading. It gives the adrenaline rush that the slow-grinding MF investments don't," says the 30-year-old software engineer.

Mehta concedes that derivatives are not easy to crack and one can often end up on the losing side. He also takes cues from random messages on social media, but cautions that "sometimes they work, often they don't." Mehta feels the sweet spot would be to have an expert or fund manager invest his money in derivatives. To be sure, there are portfolio management services (PMS) and alternative investment funds (AIFS) that take riskier bets.

However, their minimum ticket sizes are ₹50 lakh for PMS and 1 crore for AIFS.

Those like Mehta, who want to invest a few lakh rupees in derivatives have to either resort to the do-it-yourself technique or settle for MFs, which are allowed to use the derivatives segment only for hedging.

Mehta is yet to fall in the trap of schemes that promise unrealistically high returns, but several others have.

To address this problem, the Securities and Exchange Board of India (Sebi), the markets regulator, has proposed a new asset class that will sit in between MFS and PMS or AIFs. The minimum ticket size for the yet-to-benamed asset class is proposed to be ₹10 lakh.

The regulator has said the structure of the proposed asset class will be akin to MFs, but it will be allowed to offer riskier investment strategies. The various investment thresholds in debt securities or real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) will be slightly more relaxed vis-à-vis MFs.