Sebi Amends AIF Rule; Specifies Maximum Permissible Limit for Extension of Large Value Funds' Tenure

Markets regulator Sebi has amended alternative investment funds (AIF) norms specifying maximum permissible limit for extension of tenure by ‘Large Value Funds’. In a notification, Sebi said a large value fund for accredited investors may be permitted to extend its tenure up to five years. This is subject to the approval of two-thirds of the unit holders by value of their investment in the large value fund for accredited investors.

The extension in tenure of any existing scheme of a large value fund for accredited investors will be subject to such conditions as specified by the regulator.

The move is aimed at providing clarity to investors in Large Value Funds for Accredited Investors (LVFs) about their investment horizon.

Large Value Fund (LVF) for accredited investors means an AIF or scheme of an AIF in which each investor (other than the manager, sponsor, employees or directors of the AIF or employees or directors of the manager) is an accredited investor and invests at least Rs 70 crore.

Additionally, the regulator has allowed Category I and II AIFs to borrow for a period of up to 30 days for the purpose of meeting temporary shortfall in drawdown from investors while making investments in a bid to facilitate ease of doing business and provide operational flexibility.

Category I and II AIFs shall “not borrow funds directly or indirectly or engage in any leverage for the purpose of making investments or otherwise, except for borrowing funds to meet temporary funding requirements and day-to-day operational requirements for not more than 30 days, on not more than 4 occasions in a year and not more than 10 per cent of the investable funds and subject to such conditions as may be specified by the Board from time to time”.

To give this effect, the Securities and Exchange Board of India (Sebi) has amended AIF rules on August 5.