Capital markets regulator Sebi has changed the rules relating to the investment aspects of certain categories of alternative investment funds (AIFs).
Under the rules, Category III AIFs cannot invest more than 10% of investable funds in a beneficiary company, either directly or through investments in shares of other AIFs, Sebi said in a notification on Wednesday.
Various types of funds such as hedge funds, PIPE funds, etc. are registered as Category III AIFs.
In addition, high value funds for qualified investors of Category III AIFs may invest up to 20% of investable funds in a beneficiary company, either directly or through investments in units of other AIFs.
It is provided that for investments in listed shares of a beneficiary company, Category III AIFs may calculate the investment limit of 10% of the investable funds or the net asset value of the scheme, while the funds of great value for qualified Category III investors AIFs can calculate the investment limit of 20% either of the investable funds or of the net asset value of the fund.
The new standards called AIF regulations of Sebi, 2022 came into force on Wednesday.
In November 2021, the regulator allowed Tier III AIFs, including high-value funds for investors qualifying as Tier III AIFs, to calculate the concentration standard based on the net asset value (NAV) of the investment fund in listed shares of a beneficiary company.
AIFs, in market parlance, refer to a private pool investment vehicle that raises funds from Indian or foreign investors to invest those funds in India.
Broadly speaking, AIF rules govern venture capital funds, private equity funds, SME funds, hedge funds, among others.
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