The central idea is to channelise the household savings in building India’s infrastructure. As of now mutual funds only invest in listed companies involved in infrastructure and related services. The committee recommends ways in which mutual funds can invest in unlisted companies involved in infra and also suggests various measures to make them popular among households and individuals.
- DIFs should operate as closed ended schemes with a maturity of seven years and a possibility of one or two extensions; should be given a listing option to provide liquidity to retail investors.
- For making them popular, offer tax incentives to retail investors.
- DIFs may be allowed to invest upto 100% of its funds into unlisted securities including both equity and debt instruments.
- On the issue which attracts most, the fees and expenses of these funds cannot be comparable to others as it would involve analysing unlisted companies. Hence, these schemes would have higher expenses. The Committee suggests that maximum overall permissible expense ratio can be additional 1% over and above that specified in the Mutual Fund Regulations.
- DIFs should report the fund NAV at the time of each asset valuation and also at quarterly intervals.
- About valuations, the Committee believes that current SEBI guidelines to value unlisted equity shares will need to be suitably amended for the proposed asset class.
I have still not read the report fully, so cannot comment. However, it looks pretty interesting as it has some international case-studies as well.
For me, it is more interesting as I had mentioned this as one of the suggestions to finance India’s infrastructure in my internship report I had done some time back.