SEBI wants IPO-like prospectus from AIFs

Our Bureau Mumbai | Updated on December 05, 2019

Seeks public comments on proposals till December 25

Investors in Alternative Investment Funds (AIFs) will now be able to get more information about the funds. AIFs are allowed to collect money from public investors but like an IPO prospectus, they too will now have to publish their risk prospectus and other details. SEBI has proposed to introduce minimum benchmarks for disclosure of performance history of such asset class and standardisation of draft document issued to investors by them.

Currently, there is no standard format for the draft document or private placement memorandum (PPM), which provides the necessary information that a prospective investor should have about the AIF.

According to SEBI, investments by registered AIFs have grown 75 per cent year-on-year in the last two years. Total investments made by AIFs have risen from over ₹35,000 crore in March 2017 to ₹61,400 crore in March 2018 to ₹1.1-lakh crore in March 2019. But there is no disclosure by AIFs indicating returns on their investments, and, in turn, their performance available in the public domain, SEBI said while issuing the draft papers. SEBI has sought public comments on these proposals till December 25.

Information to agencies

“Any investment manager of an existing unregistered fund, including foreign fund, shall provide the data on their investments in Indian companies to benchmarking agencies when they seek registration as AIF,” SEBI said.

The regulator added that “If any performance data based on previous experience of the investment manager is referred in the fund documents or marketing material furnished to SEBI, the same shall be accompanied by the benchmark report received by the applicant.”

SEBI said any association of registered AIFs which in terms of membership represent at least 50 per cent of such registered asset class, may propose one or more benchmarking agencies, who shall enter into agreement with AIFs for carrying out benchmarking process. AIFs that have been registered for over three years will have to provide the necessary information.

Published on December 05, 2019

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