On fees and expenses, the panel has observed that “in light of the unique nature of DIFs like requirement of dedicated teams for the management of such schemes, requirement of in-depth research because of companies being unlisted and information not being easily available, higher level of monitoring of investments, the fee structure of such funds will have to be different from that of existing MF schemes, in line with global practices.

“The Committee suggested that the maximum overall permissible expense ratio for DIFs, including investment management fees be an additional 1 per cent over and above that specified in mutual fund regulations. Additionally, the DIFs should also be allowed to charge a performance fee after providing a certain minimum return to the unit holders, as per global practices,” it said.

On valuations, the Committee recommended that DIFs should report the fund NAV at the time of each asset valuation and also at quarterly intervals. About valuations, it believes that current Sebi guidelines to value unlisted equity shares will need to be suitably amended for the proposed asset class. The proposed DIFs should engage an approved consultant to value the assets semi-annually. Such an approved list can be drawn up by Sebi-registered rating agencies. The Committee proposes that DIFs can be launched by all Sebi-registered Asset Management Companies (AMCs), but should have a dedicated team for managing the funds and their trustees should be satisfied in this respect. On investor profiles, the panel suggested that all individuals, companies, corporates, institutions and financial institutions (FIs) should be eligible to make investment in such MFs.

... contd.