Capital markets regulator the Securities and Exchange Board of India (SEBI) has recently proposed allowing private equity (PE) funds to sponsor a mutual funds house.
A private equity (PE) fund is similar to a mutual fund or hedge fund, which is a pooled investment instrument. A fund manager combines the money placed in the fund by all investors and utilises that money to make investments on behalf of the fund. An investor in a private equity fund is putting their money into a fund that is managed by a private equity firm.
A sponsor plays a crucial role in the lifecycle of an asset management company (AMC) or a mutual fund. A sponsor of a mutual fund could be either an individual, a corporate or in collaboration with another legal entity. The sponsor oversees all aspects of establishing a mutual fund, including getting relevant approvals, fund-raising, incorporation, and forming an AMC.
Many existing sponsors and trustees are facing a financial crisis considering their primary businesses have failed to generate sufficient funds. PE participation as a sponsor would introduce fresh capital and bring in more competition to the current entities in the mutual fund industry. Besides, it would allow ease in the exit for existing sponsors. This would also improve value to investors.
PE funds, however, have a limited lifecycle, and returns are required to be paid to investors after a specific period. How this challenge is addressed, remains to be seen.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…
The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…
Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…
Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…
A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…
Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…