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Before the introduction of the SEBI (Alternative Investment Funds) Regulations, 2012 there were various funds which were operating unregulated. Such funds were not covered under any of the regulations specified by Securities and Exchange Board of India like SEBI (Mutual Funds) Regulations, 1996; SEBI (Custodian of Securities) Regulations, 1996 etc. It was only after the introduction of SEBI (Alternative Investment Funds) Regulations, 2012 that such unregulated funds were covered under the ambit of law. These regulations are also termed as AIF Regulations.
Alternative Investment Fund Regulations were introduced with a view to regularizing pooled funds not covered under any of the previous regulations in India. These regulations require such funds to be registered an operated as per these provisions. This was to cover such pooled investment funds under a legal umbrella. These funds can receive capital from Indian as well as foreign investors
As we have discussed above AIF are the funds include the pooled investment funds established in India which collect funds from sophisticated investors and invest them as per their Investment policy.
For further clarification let’s understand the legal definition of Alternative Investment Funds. Regulation 2 (b) of SEBI (ALTERNATIVE INVESTMENT FUNDS) REGULATIONS, 2012 specifies exactly what is covered under Alternative Investment Funds. As per this definition, an AIF has the following features:
As we have discussed they are privately pooled investment vehicles. Their main activity involves:
They are required to work for the benefit of their investors.
AIF regulations clearly specify the following list of entities which are not considered as Alternative Investment Fund:
Regulation 4 of SEBI (AIF) Regulations have provided the eligibility criteria for Alternative Investment Fund Registration. Such conditions are listed below:
The size of the fund/scheme of every AIF is directly dependent upon the Corpus of the AIF.
Every scheme of the Alternative Investment Fund (excluding angel fund) must have a corpus of minimum 20 Crore rupees.
On the other hand in the case of the Angel Fund, the Corpus must not be less than 10 Crore rupees.
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