To protect a growing pool of wealthy self-directed investors, Sebi is publishing guidelines on new rules for alternative investment schemes.

Passions are driving investment among wealthy individuals

Funds investing in alternative entities like art, antiques and vintage cars will come under greater scrutiny from the Securities and Exchange Board of India, as the watchdog draws up guidelines to safeguard a growing pool of self-directed investors. 

At the moment, India classifies investment schemes focused on passion investments like art or stamps as "collective investment schemes" which are regulated by the watchdog, but a need has been felt to have a separate set of regulations for "alternative investments", according to a report in The Economic Times. 

The issue was discussed at Sebi's board meeting last week, after which Chairman U. K. Sinha said the regulator would frame regulations to govern alternative investments and portfolio wealth managers.

Globally, alternative investments are popular among wealthy investors. According to the World Wealth Report of Capgemini and Merrill Lynch Wealth Management, passion investments are expected to account for nearly 9 per cent of high net-worth individuals' financial assets in 2011.

In 2006, high net worth individuals allocated around a tenth of their wealth to passion investments, but this dropped to 6 per cent in 2009 as the financial crisis saw nervous investors withdraw into cash.

While Sinha did not disclose what kind of alternative investments would fall under the new regulations, such schemes generally include those investing in art works, antiques, coins and stamps compared with traditional investments like stocks, commodities and derivatives, according to the report. 

Sebi regulates investments in stocks, mutual funds, debt securities, derivatives and mutual funds, among others, while there is a separate regulator for commodities.