SEBI Revamps Co-Investment Rules for AIFs to Boost Flexibility

The Securities and Exchange Board of India (SEBI) announced new measures on Tuesday, providing significant flexibility for Alternative Investment Funds (AIFs) to offer co-investment opportunities within their frameworks. Effective immediately, these changes are designed to simplify operations for AIFs.

Co-investment in AIF terminology refers to allowing investors to make additional investments in unlisted securities, where the AIF is also investing. These opportunities are available to investors meeting specific criteria like minimum commitment size and strategic value. SEBI's amendment allows Category I and II AIFs to offer co-investment through a separate Co-Investment Scheme (CIV scheme) within the AIF guidelines, in addition to the existing Portfolio Management Services (PMS) route.

The CIV scheme, overseen by Category I or II AIF managers, is governed by conditions including detailed placement memoranda outlining terms and regulatory frameworks. Each scheme maintains separate financial accounts, and co-investment limits are set to ensure compliance. The move is expected to enhance the ease of doing business without compromising on regulatory standards, according to SEBI.

(With inputs from agencies.)