SEBI Chief Ajay Tyagi has said that the market regulator will soon standardise private placement memorandum issued by AIFs to their clients. Tyagi was speaking at FICCI Capital Market Conference held recently in Mumbai.
Private placement is sale of the fund’s units to a limited group of individuals. Typically, AIFs target affluent HNIs and UHNIs, foreign offshore investors and corporates. While any individual can invest in a mutual fund NFO or equity IPO independently, AIF investments are through offer only. Generally, an investor’s financial advisor at times accompanied by the AIF’s sales personnel share the placement memorandum (similar to an SID in mutual fund parlance) of the fund with prospective investors.
AIFs can only be sold and marketed privately to savvy investors. In short, AIFs cannot be branded, advertised and distributed like mutual funds.
Further, Tyagi also said that the market regulator would ask AIFs to follow benchmarking framework to disclose fund performance. Simply put, AIFs will have to disclose their performance as against their respective benchmark to improve transparency. He said, “SEBI is in the process of taking steps to further strengthen the framework for AIFs in areas such as standardisation of the private placement memorandum and benchmarking framework for performance disclosures.”
Talking about the growth in deployment of funds through AIFs, he said, “Another vehicle which can contribute significantly to channelizing funds of investors into the capital markets is Alternative Investment Funds, especially for sophisticated and institutional investors. AIF investments have seen a significant jump in the last few years. On a cumulative basis, the investments made by AIFs stood at Rs. 1.1 lakh crore in March 2019 vis-à-vis only around Rs.7300 crore in March 2015.”