In a recently issued consultation paper, the Securities and Exchange Board of India (SEBI) has proposed a number of relaxations for large value funds (LVFs) under the alternative investment funds framework.
Apart from other things, the relaxations also include a reduction in minimum investment requirement to Rs 25 crore from the current Rs 70 crore.
The aim of introducing these changes was to widen investor participation and cut compliance costs.
The proposal to lower the investment threshold is expected to attract more domestic institutional players such as insurance companies, thereby diversifying the investor base.
The changes proposed by the SEBI follow from the recommendations from the market regulator’s Alternative Investment Policy Advisory Committee and the Ease of Doing Business Working Group.
According to the working group, the present LVF threshold of Rs 70 crore is too high and many investors, including some institutional investors, have limitations on the quantum.
Apart from relaxing the minimum investment threshold, SEBI has proposed exempting LVFs from several compliance requirements. These include the need to follow the standard template for private placement memoranda (PPM), mandatory annual audits of PPM terms, and the responsibility placed on investment committee members for approving fund decisions.
For LVF-only schemes, the market regulator may also waive off the NISM certification mandate for key investment team members of fund managers.
Further, the regulator has proposed removing the cap of 1,000 investors per AIF scheme for LVFs, citing the large ticket size and the accredited investor base as sufficient safeguards.
For existing AIM schemes, whose investors meet LVF criteria, SEBI has proposed the grant of approval to them for converting into LVFs with the consent of all investors. This would enable them to benefit from the proposed relaxations.
The securities markets regulator stated that LVFs have seen steady traction since their introduction in August 2021. Lowering of entry barriers could see LVFs play a bigger role in channelling long-term investments, especially in the case of unlisted securities.