**Summary:**
This circular, reference number SEBI/HO/IMD/DIMDI/DOF6/P/CIR/2022/0000000037, issued by the Securities and Exchange Board of India (SEBI) on March 28, 2022, addresses the calculation of investment concentration norms for Category III Alternative Investment Funds (AIFs). It amends Regulation 15(1)(d) of the SEBI (Alternative Investment Funds) Regulations, 2012, providing Category III AIFs, including large value funds for accredited investors, the flexibility to calculate investment concentration norms based on either investable funds or the net asset value (NAV) of the scheme when investing in listed equity of an investee company, subject to SEBI's specified conditions.
Existing Category III AIFs can opt for calculating investment concentration norms based on investable funds, subject to approval from their trustees, board of directors, or designated partners, and must inform their investors within 30 days of this circular's issuance. All Category III AIFs are required to disclose the chosen basis for calculation in the placement memorandum of their schemes, and this basis cannot be changed during the scheme's term. Category III AIFs calculating investment concentration norms based on NAV must comply with para 2 of SEBI circular no. SEBI/HO/IMD/DIMDI/IDOF6/P/CIR/2021/663 dated November 22, 2021.
The circular, effective immediately, is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect investor interests, promote development, and regulate the securities market. The circular is available on the SEBI website (www.sebi.gov.in) under "Legal Framework - Circulars" and "Info for Alternative Investment Funds."
For further information, contact Sanjay Singh Bhati, Deputy General Manager, at +91 22 26449222 or ssbhati@sebi.gov.in.
Key Entities Referenced
Alternative Investment Funds: A type of investment fund that typically invests in assets such as private equity, hedge funds, and real estate.
AIFs: Abbreviation for Alternative Investment Funds.
Category III AIFs: A specific category of Alternative Investment Funds as defined by SEBI, often involving more complex investment strategies.
SEBI: Securities and Exchange Board of India, the regulator of the securities market in India.
SEBI Alternative Investment Funds Regulations, 2012: The regulatory framework established by SEBI governing Alternative Investment Funds in India.
Net Asset Value: NAV, the value of an entity's assets less the value of its liabilities, often in the context of a fund or scheme.
Securities and Exchange Board of India Act, 1992: The act of parliament that established SEBI and defines its powers and functions.
Sanjay Singh Bhati: Deputy General Manager at SEBI, as indicated in the circular.
CIRCULAR
SEBI/HO/IMD/IMD-I/DOF6/P/CIR/2022/0000000037 March 28, 2022
To,
All Alternative Investment Funds (AIFs)
Sir/Madam,
Sub: Calculation of investment concentration norm for Category III AIFs
1. Regulation 15(1)(d) of SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF
Regulations”), has been amended and notified on March 16, 2022, to provide flexibility
to Category III AIFs, including large value funds for accredited investors of Category III
AIFs, to calculate investment concentration norm based either on investable funds or
net asset value (“NAV”) of the scheme while investing in listed equity of an investee
company, subject to the conditions specified by the Board from time to time. Copy of
the notification is available at link.
2. In this regard, the following is specified:
2.1. Existing Category III AIFs may opt for calculating investment concentration norm
based on investable funds with the approval of their trustees or board of directors or
designated partners, as the case may be, and inform the same to their investors
within 30 days from the date of the issuance of this circular.
2.2. All Category III AIFs shall disclose the basis for calculation of investment concentration
norm in the placement memorandum of their schemes.
2.3. The basis for calculating investment concentration norm shall not be changed during
the term of the scheme.
2.4. Category III AIFs which choose to calculate investment concentration norm based on
NAV, shall comply with para 2 of SEBI circular no. SEBI/HO/IMD/IMD-
I/DOF6/P/CIR/2021/663 dated November 22, 2021.
3. This circular shall come into force with immediate effect.
4. This circular is issued with the approval of the competent authority.
Page 1 of 25. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities market.
6. The circular is available on SEBI website at www.sebi.gov.in under the categories "Legal
framework - Circulars" and "Info for - Alternative Investment Funds”.
Yours faithfully,
Sanjay Singh Bhati
Deputy General Manager
Tel no.: +91-22-26449222
ssbhati@sebi.gov.in
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