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Realty PE & hedge funds lead addition to list of SEBI registered AIFs

Over half of the 20 new alternative investment funds (AIF) which got registered with capital market regulator Securities & Exchange Board of India (SEBI) since March this year, fall either in the hedge fund or real estate focused private equity fund basket. This has taken the total number of SEBI-registered funds to the 123 mark, as per the latest update on the AIF regime.

In March this year, SEBI had registered the 100th alternative investment fund under the two-and-a-half-year-old AIF norms.

While PE funds in general continue to dominate overall, those chasing the real estate investment theme in particular led the recent addition to the list.

The realty funds which got registered include those under Anand Rathi, ASK Group, Reliance Capital AIF and ICICI Prudential.

In addition, half a dozen hedge funds also got registered with SEBI.

In the big picture, over half of total are PE funds, around a quarter are VC & angel funds with the rest being hedge funds.

SEBI had unveiled the final norms to regulate all alternative investment funds in the country in April 2012 with IFCI Sycamore India Infrastructure Fund becoming the first fund to be registered under the new norms in July 2012.

The half century mark was reached in May 2013. It took almost 10 months to breach the 100 mark with 50 new funds. The regulator has given approval to 34 entities since January 1 this year, as against 67 last year and 22 in 2012.

The norms had put all funds under three categories to be governed separately in terms of tax incentives, investment horizon and other norms.

AIF I, the first category, includes those with ‘positive spill-over effects on the economy’. Funds that qualify under this category include angel and venture capital funds, small and medium enterprises (SME) funds, social venture funds and infrastructure funds. These funds will be close ended and they cannot engage in leveraging.

In the second category or AIF II, SEBI has included funds which can undertake leverage only to meet their day-to-day operational requirements. This category includes private equity funds, debt funds, fund of funds and such other funds that are not classified as category I or III. It also includes realty funds. These funds too will be close ended as per the regulations but will have no other investment restrictions.

Under AIF III, SEBI has included hedge funds which are considered to have ‘negative external externalities such as exacerbating systemic risk through leverage or complex trading strategies’. These funds can either be open ended or close ended and may engage in leveraging subject to limits specified by the board.

(Edited by Joby Puthuparampil Johnson)

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