Sebi amends rules governing alternative investment funds

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Markets regulator Sebi has amended the regulatory regime governing alternative investment funds (AIFs), to facilitate co-investment through the portfolio management route.

Co-investment means investment made by a manager or sponsor or investor of Category-I and -II AIFs in investee companies where such category of AIFs makes investment.

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In a notification on Tuesday, the Securities and Exchange Board of India (Sebi) said, “Co-investment by investors of alternative investment fund shall be through a co-investment portfolio manager.”

The regulator said the terms of co-investment in an investee company by a manager or sponsor or co-investor, will not be more favourable than the terms of investment of the AIF.

It further said the terms of exit from the co-investment in an investee company, including the timing of exit will be identical to the terms applicable to that of exit of the AIF.

These framework will be applicable only for co-investment made on or after December 9.

The manager will not provide advisory services to any investor other than the clients of co-investment portfolio manager for investment in securities of investee companies where the AIF managed by it makes investment.

The regulator has allowed Category-III AIFs to calculate concentration norms based on net asset value of the fund.

Sebi said Category-III AIFs will invest not more than 10 per cent of the net asset value in listed equity of an investee company. They will invest not more than 10 per cent of the investable funds in securities other than listed equity of an investee company, directly or through investment in units of other AIFs.

This is provided that large value funds for accredited investors of Category-III AIFs may invest up to 20 per cent of the net asset value in listed equity of an investee company. They may invest up to 20 per cent of the investable funds in securities other than listed equity of an investee company, directly or through investment in units of other AIF.

To give effect to this, the regulator has ameded AIF norms. This came after Sebi’s board approved a proposal in this regard in late-September.