Smaller MFs Seek SEBI Relief on SIF Entry Barriers
Smaller Mutual Fund (MF) houses have approached the Securities and Exchange Board of India (SEBI) to request changes to the entry framework for Specialized Investment Funds (SIFs). The current strict eligibility criteria, they argue, heavily favor large MF houses, hindering smaller players from entering this market.
The Current SIF Entry Framework
An Asset Management Company (AMC) can establish a SIF, which targets sophisticated investors, through one of two rigorous routes:
1. Track Record Route:
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Operating History: Minimum of three years in operation.
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Average AUM: Not less than ₹10,000 crore in the immediately preceding three years.
2. Alternate Route (CIO/Fund Manager Experience):
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SIF CIO: At least 10 years of fund management experience AND managing an average AUM of not less than ₹5,000 crore.
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Additional Fund Manager: At least three years of experience AND managing an average AUM of not less than ₹500 crore.
Challenges for Smaller MFs
Smaller fund houses contend that these requirements create a biased framework that limits competition:
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Talent Scarcity: The strict experience requirements for the CIO/Fund Manager route make it difficult for smaller MFs to find or poach eligible talent from large firms, who already employ the few managers that fit the criteria.
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Market Disadvantage: A late entry into the SIF market would be a big disadvantage in terms of market share.
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Licensing Parity: Smaller MFs argue that since they hold the same SEBI license as larger players to pool and manage money, the regulator should allow sophisticated investors (who have a high minimum investment threshold of ₹10 lakh in SIFs) to decide which MF they want to invest with.
The industry views the SIF segment, which offers strategies similar to Alternative Investment Funds (AIFs) but with a lower minimum investment, as a crucial growth area.
Other Agenda Items
The meeting between MF CEOs and SEBI Chairman Tuhin Kanta Pandey also covered the proposed changes regarding the Total Expense Ratio (TER) and brokerage fees in the consultation paper released by SEBI in October.
Explore Regulatory Frameworks
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