SEBI Chief Ajay Tyagi has urged fund managers to set up alternative investment funds (AIFs) in international financial services centre (IFSC). He was speaking at the seminar on “GIFT IFSC: Onshoring the Offshore”.
Tyagi said that the costs of setting up such fund is lower than setting up offshore funds domiciled in foreign country.
Tyagi said, “Several Indian AIFs have offshore feeder funds in various countries where money from foreign investors is pooled in order to feed into the Indian funds. Further, there are also Asia-focused and global funds, which are set up in various countries through which funds flow to different countries including India. In all these cases, an AIF in GIFT City can be considered as an alternative, more so since the costs of setting up such fund is expected to be lower than setting up offshore funds. Further, Indian fund managers looking to set up offshore funds to invest outside India may find an AIF in IFSC as a viable alternative due to relaxed conditions on investments abroad. These measures are expected to result in onshoring of the offshore fund management industry within the IFSC.”
Earlier this month, SEBI has allowed IFSC domiciled AIFs to invest in securities in line with domestic AIFs. With this, AIFs can now invest in start ups, unlisted securities and distressed papers.
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 local currency. In addition, IFSCs can provide fund raising services for individuals, corporations and governments and wealth management services to foreign investors. In India, Gandhinagar has one IFSC called Gujarat International Finance Tec-City (GIFT).
Currently, GIFT does not have any AIF due to lack of clarity in taxation, regulations and so on.