List Of Alternative Investment Funds In India

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What To Lookout For List Of Alternative Investment Funds In India

Alternative Investment Funds (AIFs) in India – Part 1 | August 2020

There are some drawbacks to investing in gold IRAs. The main drawback is that the IRA cannot hold both platinum and palladium. Another limitation is that the IRA cannot hold bullion or silver in amounts higher than $100. Investors interested in these types of investments must diversify their portfolios so that they are invested in gold IRAs with smaller amounts of each metal. It would be impractical to attempt investing in more than one type of investment through a self directed IRA.

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Grant Of Registration Of Alternate Investment Fund

The SEBI will take into account the requirements specified in the Regulations before considering the grant of Registration Certificate. After the SEBI is satisfied that the applicant fulfils the requirements, it will approve the application and inform the applicant of the same.

In case the applicant is not registered with the SEBI as a Venture Capital Fund, then a registration fee of Rs.5 lakh is to be paid to the SEBI on receipt of approval of the registration application. When the applicant is registered with the SEBI as a Venture Capital Fund, a registration fee of Rs.1 lakh is to be paid to the SEBI on receipt of the registration applications approval.

After the receipt of the registration fee from the applicant, the SEBI will grant the Certificate of Registration of Alternative Investment Fund to the applicant in Form B. This Registration Certificate will be valid till the Alternate Investment Fund is wound up.

What Key Reporting Requirements Apply To Alternative Investment Funds In Your Jurisdiction

Category I and Category II AIFs must provide reports to investors at least on an annual basis, within 180 days of the year-end. Category III AIFs must provide quarterly reports to investors within 60 days of the end of the quarter. These reports must include the following information, as may be applicable to the specific AIF:

  • financial information of investee companies and
  • details of material risks and how they are managed, which may include:
  • concentration risk at fund level
  • foreign exchange risk at fund level
  • leverage risk at fund and investee company levels
  • realisation risk at fund and investee company levels
  • strategy risk at investee company level
  • reputation risk at investee company level and
  • extra-financial risks, including environmental, social and corporate governance risks, at fund and investee company level.

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Can Alternative Investment Fund Manager Provide Investment Management Services To Clients Other Than Alternative Investment Funds If Yes Do Any Additional Requirements Apply

Yes, managers can provide investment management services to funds other than AIFs. Further, the manager can also provide portfolio management services to segregate mandate accounts by seeking registration under the SEBI Regulations, 1993 or to retail funds under the SEBI Regulations, 1996. A manager that advises resident Indian clients must seek registration under the SEBI Regulations. The manager must also disclose such associated relationships as potential conflicts of interest in the private placement memorandum.

Managers must fulfil the following additional requirements prescribed by SEBI:

  • capital adequacy requirements, as prescribed under the respective regulations
  • segregation between the different business activities in terms of bank accounts, key investment teams and operation teams and
  • ownership interest in funds as per the prescribed regulations.

Risks Involved In Aifs

Alternative Investment Funds

The risks in AIFs vary across different funds within categories. However, the risks involved in investments in Category -3 AIF Funds is generally higher than others because of their ability to take leverage for making further investments. Also, Investments in AIFs overall carry higher risks than the other market instruments like stocks, mutual funds,etc. as these funds take positions or provide funding in unlisted ventures as well.

A proper research on the available AIFs in their respective categories could be conducted to choose the one for making investments which is handling money really well and so the risks could be reduced because of their wise investment decisions.

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Which Types Of Entities Would Not Be Considered For Alternative Investment Fund Registration

When construing the provisions related to SEBI, the following types of trusts will not be considered as an AIF:

  • Family trusts set up for the benefit of relatives as defined under Companies Act, 1956
  • ESOP Trusts set up under the Securities and Exchange Board of India , Guidelines, 1999 or as permitted under Companies Act, 1956
  • Employee welfare trusts or gratuity trusts set up for the benefit of employees
  • Holding companies within the meaning of Section 4 of the Companies Act, 1956
  • other special purpose vehicles not established by fund managers, including securitization trusts, regulated under a specific regulatory framework
  • Funds managed by securitisation company or reconstruction company which is registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and
  • Any such pool of funds which is directly regulated by any other regulator in India

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Wealth Manager: Investing in Alternative Investment Funds

The Indian Association of Alternative Investment Funds is a representative of the alternative investments industry in India. IAAIF represents all the key stake-holders of the alternative investments sector including AIFs, Independent Funds Managers, Wealth Managers, Trustees, Brokers, Legal and Accounting firms, financial research & technology companies, Investors & Fund administrators. IAAIF aspires to create a prolific learning, networking & business platform for all its members through active engagement in policy development, thought-leadership work and initiatives in investor education and advocacy.

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Are There Any Requirements Regarding The Ownership Of Alternative Investment Fund Managers If So Please Provide Details

Yes. AIF managers set up as companies or LLPs must be incorporated in India. The manager can be either Indian owned and controlled or foreign owned or controlled. Further, the AIF Regulations stipulate that a minimum continuing interest must be held by the AIF manager or sponsor in the corpus of the AIF. In case of an AIF managed by a foreign owned or controlled manager, the AIF must additionally comply with the requirements set out in the Foreign Exchange Management Rules with respect to its downstream investments.

Further, a Category III AIF which has received foreign investment can invest only in those securities or investments in which a foreign portfolio investor is permitted to invest under the Foreign Portfolio Investment Regulations.

What Key Governance Requirements Apply To Alternative Investment Funds In Your Jurisdiction

In terms of governance, the AIF Regulations impose a fiduciary duty on the manager and sponsor to act in the interests of the AIF’s investors. All conflicts of interest must be mandatorily disclosed to all investors and the AIF manager is mandated to establish and implement policies and procedures to identify, monitor and mitigate all conflicts of interest.

The AIF Regulations also oblige the manager to:

  • address all investor complaints

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Alternative Investment Fund Registration Process With Sebi

The following steps have to be considered by the applicant for Alternative investment fund registration:

Application in Form A

As per Securities and Exchange Board of India Regulations, 2012 for Alternative Investment Fund registration, an applicant will make application with SEBI as per the regulations in the Form A along with the cover letter and with the other necessary documents.

Application Evaluation by SEBI

On the receipt of the application, SEBI will reply within 21 working days to the applicant. However the process of registration totally depends on the applicant. If the compliances are filed by the applicant within the correct period, then the process would be seamless.

Ensure SEBI Compliances

For expedite the registration process, an applicant should go through the Securities and Exchange Board of India Regulations, 2012.

Cover Letter

Here are the following details must be mentioned by the applicant in the cover letter:

  • Whether it is registered with SEBI as a Venture Capital Fund or not and if yes, then provide details.
  • Prior to the application, whether it has been undertaking activities of an AIF. If yes, then provide details.
  • Applying for registration of a new fund.

In case of an Authorized signatory, there is a requirement of submission of an authorization letter from the Directors/Trustees/Designated Partners of the Fund.

Payment of registration fee to SEBI

Certificate of Registration

Diversification Of Portfolio Growing Product Awareness Behind Growth

Alternative investment funds

Alternative investment funds , as a distinct asset class, are gaining more prominence in recent times amid rise in the number of wealthy individuals and their growing appetite for sophisticated financial instruments for investing.

The total assets of AIFs surpassed 5-lakh crore mark for the first time recently. According to latest data of the Securities and Exchange Board of India, assets of AIFs have grown over 32 per cent year-on-year to 5.35-lakh crore at the end of September 2021. The total AIF assets stood at 4.05-lakh crore as of September 2020 and 3.17-lakh crore in September 2019.

While traditional investment avenues such as fixed deposits, shares, and bonds are effective tools for wealth generation, savvy investors are increasingly turning to AIFs to generate additional alpha. Higher projected returns, low correlation with traditional asset classes, which allows for portfolio diversification, and recent clarity on AIF structures, standards, and taxation have all contributed to a recent increase in AIF allocations, said Sabyasachi Mukherjee, Head Investment, Fisdom Private Wealth.

R Pallavarajan, Founder & Director, PMS Bazaar, said that investor appetite for enhanced returns, diversification of portfolio beyond traditional equity and debt asset classes and growing product awareness are some of the factors pushing the growth of this alternative investment product.

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Why Should You Invest In An Aif

Alternative Investment Funds AIF pool money from sophisticated private investors. Funds collected are invested according to the investment policy of the AIF. AIFs invest in investments that are not traditional . Securities and Exchange Board of India classifies AIFs under three broad categories. Namely, Category I AIF, Category I AIF and Category III AIF. Each of the categories has different investments as per the broad definition of the category. Some of them are private equity, venture capital, hedge fund, and angel fund etc.

Following are the reasons why one should invest in AIF:

  • Diversification: AIF is a good option for portfolio diversification. The performance of AIFs does not depend on the performance of the stock market. With AIS, the investors portfolio becomes more resilient and less volatile to market fluctuations.
  • Volatility: Most alternative investments are comparatively less volatile than stocks. Hence these are a good choice of investment for those who are looking for portfolio stability.
  • Better Returns: Alternative investments offer significant returns in comparison to other traditional investments.
  • Passive Income: AIFs can be a good source of passive income for investors.

Compliances For Alternative Investment Fund Registration

  • After registration Alternative Investment Fund must comply with the reporting requirements specified by SEBI from time to time.
  • For any updating/ circulars/ guidelines issued by SEBI with respect to the Alternative Investment Fund activity, an AIF must check the SEBI website on regular intervals.
  • In case of any material change in the details already furnished to SEBI, AIF must intimate to SEBI within a reasonable period of time.

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How Are These Alternative Investment Funds Typically Structured

Under the AIF Regulations, an AIF can be structured in the form of a limited liability partnership, company, body corporate or trust. Typically, the trust is the preferred structure, due to ease of management and administration in contrast to companies and limited liability partnerships , which are subject to stringent and restrictive governance and compliance requirements under the Companies Act, 2013 and Limited Liability Partnership Act, 2008 respectively.

What Key Disclosure Requirements Apply To Alternative Investment Funds In Your Jurisdiction

Alternative Investment Funds India | SEBI AIF

AIFs must ensure transparency and disclose the following information to investors:

  • financial, risk management, operational, portfolio and transactional information regarding fund investments
  • any fees ascribed to the AIF manager or sponsor, and any fees charged to the AIF or any investee company by an associate of the AIF manager or sponsor
  • any inquiries/legal actions by legal or regulatory bodies in any jurisdiction, as and when they occur
  • any material liability arising during the AIF’s tenure, as and when it arises
  • any breach of a provision of the placement memorandum or agreement made with the investor or any other fund documents, as and when it occurs and
  • any change in control of the sponsor, manager or investee company.

Any significant change in the key investment team must be intimated to all investors.

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Can Alternative Investment Fund Managers Delegate To Third

Yes, subject to compliance with the Guidelines on Outsourcing of Activities by Intermediaries issued by SEBI. Managers cannot outsource their core business activities and compliance functions. Managers must comply with the principles for outsourcing framed by SEBI, as follows:

  • The manager must adopt a comprehensive outsourcing policy
  • The manager must conduct due diligence and adopt a risk management programme to address the outsourced activities and the relationship with the third party and
  • The manager should ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers and regulators nor impede effective supervision by the regulators.

Outsourcing relationships must be governed by written contracts or agreements which clearly describe all material aspects, including the rights, responsibilities and expectations of the parties, client confidentiality issues and termination procedures.

Documents Required For Alternate Investment Fund Registration

The documents that are to be produced along with the application for registration are-

  • Certificate of Incorporation or Registration of the applicant entity.
  • Partnership Deed in the case of the AIF registration is by a Partnership registered under the Limited Liability Partnership Act, 2008.
  • Original Deed of Trust in case of the AIF registration is by a society or trust registered under the Trusts Act, 1882.
  • Information of the directors and shareholders with respect to the AIF.
  • Copy of the Placement Memorandum of the applicant entity.
  • Contact information and other information of the applicant entity.
  • Any other business information relating to the expansion plans of the company or LLP.
  • Address and particulars of the Registered Office of the applicant entity.
  • Memorandum of Association and Articles of Association of the applicant entity.

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How Hedge Funds Work

Basically, the returns from the Hedge Funds depends upon the skill and the investor invests in the hedge funds, Funds depends and theon.Asset Regulators also play an important role in controlling the risk.

  • Sell short: The investor waits for the price to drop so that he can buy shares at a lower value.
  • Use arbitrage: The manager seeks to buy the shares due to ineffective prices at the point.
  • Invest towards an upcoming event: For example, some major market events, such as acquisitions, mergers and spin-offs, can influence the investment decisions of managers.
  • Invest in securities with high discounts: Sometimes even insolvency companies can sell the funds at lower prices. At that time, the manager can buy the shares at lower prices.
  • What Is An Aif

    PPT

    Any privately pooled investment vehicle, established or incorporated in India, in the form of a trust or a company or a limited liability partnership or a body corporate, not covered under any other SEBI or sectoral regulations. Such privately pooled investment vehicle may collect funds from investors, whether Indian or foreign, for investing such funds in accordance with defined investment policies

    Specific exclusions include family trusts, employee stock option trusts, employee welfare trusts or gratuity trusts, holding companies, special purpose vehicles not established by fund managers and regulated under a specific regulatory framework , and funds managed by registered securitisation or reconstruction companies.

    Apart from the registration and compliance requirements under the AIF Regulations, each AIF also needs to be compliant with the applicable statutes, depending upon the chosen structure of trust, LLP or a company. Apart from these, there are also filing and audit requirements for a company and an LLP. As such, a trust is the more favoured structure amongst the existing AIFs in India, since the regulatory framework governing trust structures is minimal and allows the management independence with respect to formulating its own standards of governance.

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