IRDAI has allowed insurance companies to invest in category III AIF. However, such an investment has to be made through FoF structure.
Also, such an FoF has to invest in domestic funds and not in overseas funds.
Sampath Reddy, CIO, Bajaj Allianz Life Insurance said, “IRDAI has replaced the provisions applicable for investing in AIFs which are FoFs. Earlier, insurers were not permitted to invest in such funds. The recent circular permits them to invest in AIFs which are FoFs. All other regulations pertaining to investing in Cat I and Cat II AIFs remain unchanged. Insurers are not allowed to invest in other Cat III AIFs. Besides, the move opens up another small sub category of AIFs where insurers will be permitted to invest.”
He further said that currently, there are just 3 FoFs under cat III AIFs which invest in domestic funds. These funds are risky as they are allowed to borrow 200% of the fund size to invest, he added.