AIFs cannot convert open-ended plans into closed-ended ones: Sebi

Alternative investment funds cannot convert their existing open-ended schemes to closed-ended and vice-versa, markets regulator Sebi said on Friday.

The clarifications have been given as part of an informal guidance sought by Singular India Opportunities Trust (SIOT), which is managed by Singular Capital India Advisors LLP, regarding certain aspects of AIF regulation.

SIOT is registered with Securities and Exchange Board of India (Sebi) as a category-3 AIF.

AIFs are funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy. The regulator has divided AIFs into three categories.

AIF includes venture capital funds, hedge funds, private equity funds, commodity funds, debt funds and infrastructure funds.

"There is no provision in the AIF regulations to convert the existing open-ended fund into close-ended and vice-versa," Sebi said in the interpretive letter on Friday.

The open-ended schemes offer units to the investors on a continuous basis and do not have a fixed maturity period. This means that the investors can buy units or sell units from the AIF at any time, thereby making the corpus of the fund variable.

On the other hand, close-ended funds are offered to investors for a limited period only.

According to Sebi, AIFs are allowed to launch multiple schemes during their tenure. They can launch schemes subject to the filing of placement of memorandum with Sebi at least 30 days prior to the launch of such a scheme, as per the letter.

The markets watchdog needs to communicate its comment, if any, to the fund prior to the launch of the scheme and the applicant will have to incorporate the same in the placement of memorandum before launching the scheme, it added.

Noting that this position is based on the information furnished, Sebi said, "different facts or conditions might require a different result". "This letter does not express a decision of the board on the question referred," the regulator added.