SEBI, by way of a Notification dated December 16, 2024, has amended the SEBI Mutual Funds Regulations 1996 (‘Mutual Fund Regulations’) to introduce regulatory framework for Specialised Investment Fund (‘SIF’) and Mutual Funds Lite (‘MF Lite’), a brief overview of which is set out below:

i.    Specialised Investment Fund: This asset class was introduced to cater to investors with higher risk appetite and to bridge the gap between traditional mutual funds and portfolio management services. Key features of SIFs include:

a. SIF cannot accept investment amounts less than INR 10 lakhs (approx. USD 11,560), unless such investment is received from an accredited investor,

b. SIFs cannot invest more than 20% of their net asset value (‘NAV’) in debt instruments. Such investments may be extended up to 25% of NAV, with approval from board of trustees and board of directors of AMC;

c. SIFs cannot own more than 15% of any company’s paid up capital carrying voting rights; and

d. SIFs are permitted to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) provided such investment does not result in the SIF owning more than 20% of the concerned investment trust.

ii.   MF Lite: SEBI has introduced a relaxed regulatory framework for passively managed mutual fund schemes, called MF Lite, with the objective of promoting ease of entry, encourage new players, reduce compliance requirements for such schemes, etc. Key requirements pertaining to MF Lite include:

a. private equity funds or pooled investment vehicles are permitted to sponsor MF Lite, subject to prescribed conditions;

b. contribution by sponsor of 40% of net-worth of MF Lite AMC;

c. sponsors are permitted to transfer passive funds from existing mutual funds to MF Lite, provided that the original mutual fund does not launch any new passive fund after such transfer;

d. an existing mutual fund that intends to only launch MF Lite schemes can surrender its existing registration and migrate to MF Lite, subject to prescribed conditions; and

e. MF Lite AMCs are required to have a net-worth of at least INR 35 crores (approx. USD 4,040,000), which may be brought down to INR 25 crores (approx. USD 2,885,700) in case it has profits for five consecutive years.