Clarifications regarding amendment to SEBI (Alternative Investment Funds) Regulations, 2012
Summary
This circular clarifies the calculation of concentration norms for Category III Alternative Investment Funds based on Net Asset Value. It defines 'Co-investment' and specifies custodian appointment requirements when combined corpus exceeds five hundred crore rupees. The regulations are amended to allow passive breaches of concentration limits to be rectified within thirty days.
Text
Regulation 15(1)(d) has been amended to allow Category III AIFs, including large value funds for accredited investors, to calculate the concentration norm based on Net Asset Value (NAV) of the fund for investment in listed equity of an investee company.
The limit for investment in listed equity shall be calculated based on the NAV of the fund on the business day immediately preceding the date on which the Category III AIF makes such investment.
NAV of the AIF shall be the sum of value of all securities adjusted for mark to market gains/losses (including cash and cash equivalents). The NAV shall exclude any funds borrowed by the AIF.
Passive breach of concentration norm, i.e. when the market value of the investment of Category III AIF in listed equity of an investee company exceeds the investment limit as prescribed under Regulation 15(1)(d) of AIF Regulations, shall be rectified within 30 days from the date of the breach.
Regulation 2(1)(fa) has been inserted to state that 'Co-investment' means investment made by a Manager or Sponsor or investor of Category I and II Alternative Investment Fund(s) in investee companies where such Category I or Category II Alternative Investment Fund(s) make investment. Provided that Co-investment by investors of Alternative Investment Fund shall be through a Co-investment Portfolio Manager as specified under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020;
The requirement of appointment of custodian, as provided under Regulation 20(11) of AIF Regulations, shall be applicable if the sum of corpus of the AIF and the value of the Co-investment managed by the Manager of the AIF as Co-investment Portfolio Manager is more than five hundred crore rupees.
Source: SecMarx — Clarifications regarding amendment to SEBI (Alternative Investment Funds) Regulations, 2012. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.