Markets regulator Sebi has come out with clarifications with respect to the latest amendment to norms governing alternative investment funds (AIFs). Through a notification issued on November 9, Sebi amended Alternative Investment Funds Regulations, 2012.
It allowed category III AIFs, including large value funds for accredited investors of category III AIFs, to calculate the concentration norm based on net asset value (NAV) of the fund for investment in listed equity of an investee company. The amendment also facilitated co-investment through the portfolio management route.
In a circular on Monday, Sebi specified that the investment limit in listed equity has to be calculated based on the NAV of the fund on the business day immediately preceding the date on which the category III AIF makes investment.
The NAV of the AIF will be the sum of value of all securities adjusted for mark to market gains/losses. This would include cash and cash equivalents but exclude any funds borrowed by the AIF.
On passive breach of concentration norm, Sebi said when the market value of the investment of category III AIF in listed equity of an investee company exceeds the prescribed investment limit, it shall be rectified within 30 days from the date of the breach. Sebi further said that appointment of custodian would be required 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 Rs 500 crore. Co-investment means investment made by a manager or sponsor or investor of category-I and -II AIFs in investee companies where such category of AIFs makes investment.
As per the amended norms, co-investment by investors of AIF shall be through a co-investment portfolio manager.