- Capital markets regulator SEBI has amended the rules pertaining to investment aspects of a certain category of alternative investment funds (AIFs). Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable: [Ref. Regulation 3(4)]
Category I AIF:
o Venture capital funds (Including Angel Funds)
o SME Funds
o Social Venture Funds
o Infrastructure funds
Category II AIF
Category III AIF - Under the rules, Category III AIFs can invest not more than 10 per cent of the investable funds in an investee company, directly or through investment in units of other AIFs.. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.
- Further, the large value funds for accredited investors of Category III AIFs can invest up to 20 per cent of the investable funds in an investee company, directly or through investment in units of other AIFs. This is provided that for investment in listed equity of an investee company, Category III AIFs may calculate the investment limit of 10 per cent of either the investable funds or the net asset value of the scheme, while large value funds for accredited investors of Category III AIFs may calculate the investment limit of 20 per cent of either the investable funds or the net asset value of the scheme.
- The new norms called SEBI’s AIF Regulations, 2022 became effective from Wednesday. In November 2021, the regulator allowed category III AIFs, including large value funds for accredited investors of Category III AIFs, to calculate the concentration norm based on net asset value (NAV) of the fund for investment in listed equity of an investee company.
- The new norms called SEBI’s AIF Regulations, 2022 became effective from Wednesday.
- In November 2021, the regulator allowed category III AIFs, including large value funds for accredited investors of Category III AIFs, to calculate the concentration norm based on net asset value (NAV) of the fund for investment in listed equity of an investee company.
- Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its
investors. AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities. Further, certain exemptions from registration are provided under the AIF Regulations to family trusts set up for the benefit of ‘relatives‘ as defined under Companies Act, 1956, employee welfare trusts or gratuity trusts set up for the benefit of employees, ‘holding companies‘ within the meaning of Section 4 of the Companies Act, 1956 etc. [Ref. Regulation 2(1)(b)]
