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In a significant move to increase the operational flexibility and reduce the compliance burden on AIF players, SEBI has proposed allowing co-investment opportunities in the unlisted securities under the AIF framework.
SEBI has proposed to identify Co-Investment Vehicle (CIV) as a separate scheme under AIFs. Co-investment refers to the investment opportunity for investors of AIFs for additional investment in unlisted securities, where AIF is also making investments or have made investments.
So far, AIFs were required to run CIV under PMS structure. The SEBI circular highlights that the co-investment vehicle will align the interests of co-investors with those of the AIF so that the interests of all investors are not adversely affected by the co-investment.
According to the circular, the category I and II AIFs will be allowed to offer co-investment opportunities through a separate scheme under the AIF umbrella.
Further, the CIVs will be exempted from certain regulatory norms, such as diversification requirements, minimum tenure, and sponsor commitments which are aimed at enhancing speed and efficiency.
Here are other key recommendations;
- CIVs will be allowed to be registered as Category I or Category II AIF, depending on the original classification of main AIF
- The investment manager will have to seek registration from SEBI for the CIV at the time of the first co-investment deal
- The CIV will be automatically approved if no queries from SEBI within 30 days of filing
- The tenure of CIV will be the same as the original AIF
- The fund will need to file a quarterly filing of the CIV with SEBI
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