SEBI permits 100 alternative funds to operate in India

PTI Mumbai | Updated on March 25, 2014

Market regulator SEBI has allowed as many as 100 entities to set up AIFs — newly created class of pooled—in investment vehicles for real estate, private equity and hedge funds — in less than two years.

The 100 Alternative Investment Funds (AIFs) have been registered with SEBI since July 2012.

Out of this, around 11 entities got market regulator’s approval to operate so far this year, 67 in 2013 and the remaining 22 in 2011.

The AIFs that have registered with SEBI included Religare Credit Investment Trust, Indian National gems Fund and Milestone Alternative Asset Fund.

The regulator had notified in May 2012, the guidelines for this new class of market intermediaries. AIFs are basically funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre—decided policy.

In August last year, SEBI decided that the promoters of listed companies can offload 10 per cent of their equity to AIFs such as such as SME Funds, Infrastructure Funds, PE funds and Venture Capital Funds registered with it so as to meet the norm of having a minimum of 25 per cent public holding.

Under SEBI guidelines, AIFs can operate broadly in three categories. The SEBI rules apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds, among others.

The Category—I AIFs are those funds that get incentives from the government, SEBI or other regulators and include Social Venture Funds, Infrastructure Funds, Venture Capital Funds and SME Funds.

The Category—III AIFs are those trading with a view to making short—term returns and it includes hedge funds, among others.

The Category—II AIFs can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day—to—day operational requirements.

These AIFs include private equity funds, debt funds or fund of funds, as also all others falling outside the ambit of two other categories.

Published on March 25, 2014

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