Sebi asks hedge funds to inform about net investments in derivatives

Markets regulator Sebi on Friday asked hedge funds to report about cumulative net investments, made by them in commodity derivatives in a prescribed format.

Besides, such funds need to inform about the maximum investment made by them in a single underlying commodity and their monthly exposure.

Category-III alternative investment funds (AIFs) or hedge funds have to submit the monthly/quarterly report in the revised format for the period ended September 30 onwards.

In June, Sebi allowed hedge funds to invest in commodity derivatives, in a move to deepen the market and boost liquidity.

However, this is subject to certain conditions, like funds should not invest more than 10 per cent of the investible funds in one underlying commodity.

Besides, they should make disclosure in private placement memorandum issued to investors about investment in commodity derivatives and should take consent of the existing investors if such AIFs intend to invest in such derivatives.

Category-III AIFs are those that employ diverse or complex trading strategies and may employ leverage, including through investment in listed or unlisted derivatives.