Private Equity And Hedge Funds Can Now Make More From Their Idle Money

The market regulator allowed alternative investment funds—class of pooled-in vehicles for investing in real estate, private equity and hedge funds—to park the unutilised money in high-quality liquid assets, in a move that may help them earn higher returns.

“SEBI-registered AIFs may invest investment income or investment proceeds arising from sale or transfer of investments or returns from the investment (dividend or interest on securities) in liquid mutual funds or bank deposits or other liquid assets of higher quality such as treasury bills, CBLOs (collateralised borrowing and lending obligations), commercial papers, certificates of deposits, etc. before remitting it back to investors,” it said in an informal guidance response to JM Financial Ltd.

This will allow various categories of AIFs to invest nearly Rs 22,700 crore (as of June-end), according to SEBI’s informal guidance, in liquid schemes.

JM Financial had sought an informal guidance on whether its Category-II AIF, JM Financial India Fund-II, can invest the unutilised funds in other liquid mutual funds or other high-quality liquid assets till these are deployed or transferred to the investors.

The Securities and Exchange Board of India’s informal guidance process allows any market intermediary or participant to seek an interpretation of a specific provision of any act, rules, regulations, guidelines, circulars or other legal provision being administered by it in the context of a proposed transaction in securities or a specific factual situation.

There are 514 SEBI-registered AIFs as on Jan. 15. JM Financial India Fund-II was launched in April 2018. As per the quarterly updates on SEBI’s website, the Category-II AIFs, largely private equity funds, received total commitments worth Rs 1,13,169.88 crore as of June 2018. Of which, they raised Rs 56,224.94 crore and invested Rs 41,710.38 crore. Data after June are yet to be updated.