sebi-amends-aif-norms-for-lvf-tenure-extension

The Securities and Exchange Board of India (Sebi) has revised the regulations governing alternative investment funds (AIFs), introducing a maximum limit on the tenure extension for Large Value Funds (LVFs) designated for accredited investors.

 

In its recent notification, Sebi specified that a large value fund for accredited investors may now extend its tenure by up to five years, contingent on the approval of two-thirds of the unit holders, based on the value of their investments. This tenure extension will apply to any existing scheme of an LVF, subject to conditions outlined by the regulator.

 

The amendment is intended to provide investors in Large Value Funds for Accredited Investors with greater clarity regarding their investment horizon.

 

A Large Value Fund for accredited investors is defined as an AIF or a scheme of an AIF in which each investor—excluding the manager, sponsor, employees or directors of the AIF, or employees or directors of the manager—is an accredited investor and invests a minimum of ₹70 crore.

 

In addition, Sebi has permitted Category I and II AIFs to borrow for up to 30 days to address temporary shortfalls in drawdowns from investors, aimed at facilitating ease of business operations and enhancing operational flexibility.

 

According to the updated rules, Category I and II AIFs are prohibited from borrowing funds, directly or indirectly, or engaging in leverage for investment purposes, except to meet short-term funding needs and day-to-day operational requirements. These borrowings are limited to 30 days, on no more than four occasions in a year, and must not exceed 10% of the investable funds, subject to conditions specified by Sebi.

 

These amendments to the AIF regulations were enacted on 5th August.