The Securities and Exchange Board of India (SEBI) has officially approved the launch of a new asset class designed to bridge the gap between mutual funds and portfolio management services (PMS). The move is aimed at providing investors with greater flexibility and the potential for higher returns by allowing them to take on more risk, while also adding depth to India’s investment landscape.

Following its board meeting on Monday, SEBI announced that the new product will have a minimum ticket size of ₹10 lakh per investor, across all investment strategies within a particular asset management company (AMC). Referred to as “Investment Strategies,” this new category is intended to remain distinct from traditional mutual funds while giving investors more room to diversify.

The product, which has been under discussion since SEBI released a consultation paper in July, will cater to investors with surplus investable funds between ₹10 lakh and ₹50 lakh. It will offer higher risk-and-reward strategies like Long-Short Equity Funds and Inverse ETFs/Funds, which are popular in international markets such as the US and Australia but have yet to be introduced in India. Only eligible mutual funds, with at least ₹10,000 crore in assets or managed by experienced fund managers, will be permitted to launch these offerings.

The regulator emphasised that this new asset class would not only expand investment opportunities but also help curb the growth of unauthorised schemes that often lure investors with promises of unrealistic returns.

SEBI’s safeguards for the new product include strict regulations, such as no leverage and limitations on investments in unlisted and unrated instruments. Additionally, derivatives exposure will be capped at 25% of assets under management (AUM), with these derivatives used only for hedging and rebalancing.

This initiative is seen as a step toward providing well-regulated, professionally managed investment options for those with larger capital to invest while maintaining strong risk mitigation measures.