SEBI set down the original alternative investment fund regulations in 2012. Subsequently, there have been several iterations of the regulations based on market recommendations. The last major amendment came in March 2017 based on recommendations of the second Alternative Investment Policy Advisory Committee (AIPAC). This forms the basis of all new AIFs launched in the market.
Here is a brief recap of all regulatory changes in AIFs since March 2017:
June 2017: SEBI permitted category 3 AIFs to invest in commodities market. Consequently, AIFs could take maximum exposure of 10% of their assets in a single commodity. In addition, these AIFs could engage in, leverage or borrow with the consent of the investors subject to maximum limit laid down by the board. As per the guidelines, AIFs would need to disclose the investments to investors and comply with necessary reporting norms issued by SEBI.
July 2017: SEBI permitted online filing of AIFs. The online system can be used for application for registration, reporting and filing.
September 2017: SEBI revised the reporting norms of category 3 AIF for a more accurate and complete picture of the commodity investments made by these funds.
May 2018: SEBI announced multiple changes to angel fund regulations namely:
- The minimum corpus for an angel fund was reduced from Rs.10 crore to Rs.5 crore
- The total investment period for an angel fund was extended from three years to five years.
- Angel fund investment limit in venture capital undertaking was enhanced from Rs.5 crore to Rs.10 crore
- Angel funds formed as a company, would need to comply with the provisions of the Companies Act, 2013
July 2018: SEBI enhanced the overseas investment limits from AIFs from USD 500 million to USD 750 million.
November 2018: SEBI permitted domestic fund managers or sponsors of AIFs to manage AIFs headquartered in international financial services centre (IFSC). An IFSC is exempted from certain domestic laws; instead, they follow international practices. IFSCs deals with flows of finance, financial products and services across borders. Companies setting up offices in IFSCs cannot deal in the local
The regulations regarding AIFs in IFSC state
- Each scheme of AIFs in IFSC will have to maintain a minimum corpus of USD 3million.
- The minimum investment amount in these schemes is USD 150,000. However, if the investors are employees or directors of the AIF, the minimum investment amount is lower at USD 40,000.
- The scheme’s sponsor or manager will have to invest 2.5% of the total corpus or USD 750,000, in the scheme, whichever is lower. For category 3 AIF, a minimum investment of 5% of the assets or USD 1.5 million has to be put in by the sponsor or manager.
- In case of angel funds, the minimum scheme size has to be USD 750,000. The minimum investment per angel investor is USD 40,000 and the maximum investment period will be 5 years.
