Markets regulator Sebi on Friday came out with a framework for alternative investment funds (AIFs) to invest simultaneously in units of other AIFs and directly in securities of investee companies.
Under the framework, existing AIFs may also invest simultaneously in securities of investee companies and in units of other AIFs, Sebi said in a circular.
This is subject to appropriate disclosures in the private placement memorandum (PPM) and with the consent of at least two-thirds of unit holders by value of their investment, it added.
AIFs that propose to invest in units of other AIFs will have to provide information in their PPMs about the proposed allocation of investment in units of other AIFs and process to be followed by the manager to ensure compliance with investment conditions.
In addition, information pertaining to details on whether any investments are proposed to be made in units of other AIFs managed or sponsored by the same manager or sponsor need to be disclosed. They also need to disclose about allocation of such units, fees and expenses, among others.
Out of the total fees and expenses charged to investors of the AIF, portion of fees and expenses that may be attributed to investment in units of other AIFs also need to disclosed in private placement memorandum.
"Category-III AIFs investing in units of other AIFs may undertake leverage not exceeding two times of the value of portfolio (NAV) after excluding the value of investment in units of other AIF," Sebi said.
Sebi said the key management personnel of the AIF and the manager will have to abide by the code of conduct as specified in norms.
The key management personnel include members of key investment team of the manager, employees who are involved in decision making on behalf of the AIF, including members of senior management team at the level of managing director, chief executive officer, chief investment officer and whole-time directors.
Further, AIFs will have to disclose the names of all the key management personnel of the AIF and manager in their PPMs. Any change in key management personnel needs to be intimated to the investors and the Sebi.
The regulator said consent of the investors of the AIF or scheme may not be required for change in ex-officio external members (who represent the sponsor, sponsor group, manager group or investors, in their official capacity), in the investment committee set up by the manager.
"Category-III AIFs investing in units of other AIFs may undertake leverage not exceeding two times of the value of portfolio (NAV) after excluding the value of investment in units of other AIFs," Sebi said.
AIFs are funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy.