In a letter issued to JM Financial, SEBI has clarified that alternative investment funds can invest its unutilized funds in the units of liquid funds.
AIFs can also invest their unutilized portion in bank deposits and liquid assets of higher quality such as treasury bills, commercial papers and certificate of deposits.
However, AIFs will have to keep their unit holders informed about such exposures, said SEBI.
In the letter, SEBI said, “The provisions under regulations is provided in the interest of investors with respect to un-invested portion of the investable funds till deployment of these funds as per the investment objective. Considering this, SEBI registered AIFs may invest investment income or proceeds arising from sale/transfer of the investment or returns from the investment (dividend or interest on securities) in liquid funds, bank deposits or other liquid assets of higher quality. However, to ensure the transparency and disclosure requirements as specified in AIF regulations, the AIFs shall disclose information about the proposed transaction periodically to the investors.”
Earlier, JM Financial sought a clarification if JM Financial India Fund II, a category II AIF can invest unutilized funds arising out of receipt of proceeds from sale/transfer of investment or returns earned from investments such as dividend or interest in liquid funds.