SEBI: Investment In Mutual Funds Is Not Covered Under Permissible Investments By A Category III AIF

• Published date: 04 April 2024
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Financial Services, Fund Management/ REITs, Securities
• Law Firm: Argus Partners
• Author: Mr Adity Chaudhury

The Securities and Exchange Board of India ("SEBI") has issued an informal guidance on whether a Category III alternative investment fund ("Cat III AIF") can invest in mutual funds on a permanent basis as a part of the multi asset portfolio.

The informal guidance notes that in terms of regulation 18 of the SEBI (Alternative Investment Funds) Regulations, 2012 ("AIF Regulations"), a Cat III AIF can, inter alia, invest in securities of listed or unlisted investee companies, derivatives, units of other AIFs or complex or structured products. In terms of regulation 2(1)(o) of AIF Regulations, "investee company" means any company, special purpose vehicle or limited liability partnership or body corporate or real estate investment trust or infrastructure investment trust in which an AIF makes an investment.

Accordingly, the informal guidance states that investment in mutual funds is not covered under permissible investments by a Cat III AIF. However, in terms of...