The actual investments for funds that have closed from 2012 to date seem to be only about 60-65 per cent of the commitments (weighted by value), Ananth Narayan, SEBI whole time member, said on Tuesday. Only about 7 per cent of the actual investments have gone into start-ups, as defined by DPIIT.

The commitments of alternative investment funds had reached ₹10.8 lakh crore, a 44 per cent increase year-on-year on the total size of the commitment. Actual investments had touched ₹4 lakh crore and that again has shown a 35 per cent compounded annual growth rate over the last five years. There are now 1.4 lakh investors in the entire AIF ecosystem.

In terms of commitments, it’s about 50 per cent foreign and 50 per cent domestic. In terms of investments, it’s about 35 per cent foreign and 65 per cent domestic. Actual investments are still heavily weighted towards domestic.

AIF commitments

“For all the talk of funding winter, we’re still going great guns as far as the AIF commitments are concerned,” Narayan, who was speaking at the IVCA Conclave 2024, said.

SEBI will tweak the proposals that seek to enhance trust in the alternative investment funds ecosystem to facilitate ease of doing business. The consultation paper floated last month requires AIFs, managers and their key management personnel to ensure that AIFs are not used to circumvent financial sector regulations. This has been criticised by the industry as being too subjective.

“While these are principle-based regulations, we will break it down into prescriptive-based regulations. The specific obligations will be specified from time to time in consultation with the industry. We will come out with a framework where we will specify the exact regulation that we are trying to prevent the circumvention of,” said Narayan.

Industry concerns

While discussing the regulatory concerns of the industry, he urged for a collaborative approach. He also highlighted a key concern of policymakers and regulators: “We are seeing situations where the AIF structure has been used to circumvent existing financial sector regulations. We have got to be very clinical about this; we must ensure trust in the ecosystem. At the same time, we have got to make sure we don’t come in the way of good, productive capital formation.”

Narayan also discussed how the industry’s concerns are being allayed. With reference to the liquidation scheme, which was considered onerous, he said, “We are doing away with it. We are proposing that you can continue with existing funds, but we will have checks and balances to ensure that our concerns around valuations, performance of the manager – all of that is taken care of. We’ll find a way out without necessarily requiring a new liquidation scheme.”

Narayan also revealed that SEBI is proposing that AIF investments into infrastructure SVPs will be allowed for raising debt in that particular SVP. In association with the RBI, a special situations fund will also be launched.