In a letter issued to JM Financial, SEBI has clarified that venture capital funds which fall under AIF category 1 can invest their unutilized funds in units of liquid funds.
Such 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, such AIFs will have to keep their unit holders informed about such exposures, said SEBI.
JM Financial had sought clarification from SEBI if they could invest unutilized sums from their venture capital funds arising out of transfer of investment or returns earnings from investments such as dividend in liquid funds.
In its reply SEBI said, “SEBI registered VCFs may invest unutilized funds of investable fund in the units of liquid funds or bank deposits or liquid assets of higher quality such as treasure bills, CBLOs, commercial papers, CDs etc. during the tenure of the fund specified in the private placement memorandum.”
However, the market regulator has clarified that the guidance is based on the information furnished in the query letter. Different circumstances might lead to different interpretations, SEBI added.
