SEBI is concerned that many investors- in the race to earn higher returns (out of greed)- rush to high-risk Portfolio Management Services and sometimes to unregistered advisors.
Instead, he quoted SEBI’s thinking- if mutual funds launch such a high risk product, then investors would more likely stay with mutual funds, which itself is tightly regulated by SEBI.
According to people familiar with the matter, SEBI hasn’t specified the instruments that this fund can invest in. “Matters are still at consultation stage,” said this official. But MF industry officials say that such a scheme might be allowed to invest in instruments like momentum stocks (small-cap, mid-cap, micro-cap and mini-cap stocks), use derivative and high-risk leverage strategies.