Alternate investment funds (AIFs),including private equity,social venture and real estate funds,will soon come under the regulatory purview of the Securities and Exchange Board of India (Sebi). Sebi has proposed to create a structure where regulatory framework for all shades of private pool of capital or investment vehicles so that such funds are channelised in the desired space in a regulated manner without posing systemic risk. The proposed Sebi (Alternative Investment Fund) Regulations would register and regulate the formation of investment funds which raises capital from a number of high net worth investors with a view to investing in accordance with a defined investment policy for the benefit of those investors, Sebi said in a concept paper. The following categories will come under AIF regulations: venture capital fund,PIPE funds,private equity fund,debt funds,infrastructure equity fund,real estate fund,SME fund,social venture funds and strategy fund (residual category,including all varieties of funds such as hedge funds,if any). It would be mandatory for all types of private pools of capital or investment funds to seek registration with Sebi. The funds could be formed as companies,trusts or body corporate including LLP structure. The regulations would require that the fund manager/asset management company or trustees of the fund be specified,and change of such entities be reported to the regulator, Sebi has proposed. Funds should be close ended. The fund size can be revised upward up giving Sebi suitable reasons. Minimum investment amount would be specified as 0.1 per cent of fund size subject to a minimum floor of Rs 1 crore. The minimum investment criterion would prevent retail investors straying into funds and the granularity would ensure a maximum number of investors as 1,000 precluding the possibility that some funds might disguise themselves as private pools while approaching a large number of retail investors, it said. In the case of an AIF constituted as company or LLP,the number of shareholders or partners should not exceed 50. The size of units issued will not be less than Rs 10 lakh. Funds may be raised only through private placement through information memorandum,it said.
