AIFs can now invest in units of other AIFs even without having fund of funds structure.
Existing AIFs wanting to invest in other AIFs will have to take consent of at least two-third unitholders by value of their investment. Such AIFs will also have to make appropriate disclosures in the Private Placement Memorandum (PPM), said SEBI.
The disclosures include proposed allocation in units of other AIFs, applicable fee for the investment and process to be followed by the manager. AIFs also need to inform unitholders if they plan to invest in AIFs managed by the same manager, sponsor or associates of the manager.
The circular clarified that Category III AIFs cannot take leverage on corpus they deploy towards units of other AIFs. Such a scheme can leverage to the extent of their investment in investee companies.
SEBI has also issued a clarification with respect to investment committee. The regulator said that consent of investors is no longer required for change in ex-officio external members in the investment committee set up by the fund manager. Ex-officio external members include sponsor, sponsor group and manager group of investor.