The Securities and Exchange Board of India (SEBI) has allowed 100 entities to set up Alternative Investment Funds (AIFs) in less than two years. AIFs are basically funds established in India for the purpose of pooling in capital from Indian and foreign investors for investing as per pre-decided policy.
The 100 Alternative Investment Funds (AIFs) have been registered with SEBI since July 2012. Out of which, around 11 entities got market regulator's approval during current year to operate in the country, while 67 AIFs got approval in 2013 and the remaining 22 in 2012. SEBI had notified guidelines for this new class of market intermediaries in May 2012 and these guidelines apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds, among others.
As per market regulator, AIFs can operate broadly in three categories. The Category-I AIFs include Social Venture Funds, Infrastructure Funds, Venture Capital Funds and SME Funds which can get incentives from the government, SEBI or other regulators. The Category-III AIFs includes hedge funds which can trade with a view for making short-term returns. The Category-II AIFs are private equity funds, debt funds or fund of funds and can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day-to-day operational requirements.In August 2013, SEBI notified that promoters of listed companies can offload 10 percent of their equity to AIFs registered with it so as to meet the norm of having a minimum of 25 percent public holding.
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