AIF investments rise to over Rs 1.4 trillion in Dec quarter 2019: Sebi data

Investments by alternative investment funds (AIFs) rose to over Rs 1.4 trillion in December quarter 2019, registering an increase of 53 per cent over the year-ago period.

The investment made by AIFs was pegged at Rs 1,42,115.104 crore in the latest quarter, while in the year-ago period, the figure stood at Rs 92,825 crore, the latest data available with Sebi showed. At the end of September 2019 quarter, the investment stood at Rs 1.25 trillion.

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. Under the Sebi guidelines, AIFs can operate broadly in three categories.

The category I AIFs pumped in Rs 13,904 crore, category II Rs 92,433 crore and category III Rs 35,777 crore during the period under review.

The category-I AIFs are those funds that get incentives from the government and regulators and include social venture, infrastructure and venture capital funds.

The government in November 2019 approved a Rs 25,000 crore fund to help complete over 1,600 stalled housing projects. Finance Minister Nirmala Sitharaman had said the AIF will comprise Rs 10,000 crore coming from the government and the remaining will be provided by state insurer LIC and the country's largest lender SBI.

The category-III AIFs are those trading with a view to making short-term returns and include hedge funds. The category-II AIFs can invest anywhere in any combination, but are prohibited from raising debt, except for meeting their day-to-day operational requirements. These AIFs include private equity and debt funds or fund of funds.

In order to streamline disclosure standards, markets watchdog Sebi earlier this month came out with guidelines for compulsory performance benchmarking for AIFs.

According to Harsh Agarwal, head of alternative strategies, Tata Asset Management, Sebi's disclosure mechanism will have "meaningful benefit for the industry and more so for the investors considering investing in AIFs."

In absence of a benchmark, it is often difficult to understand the nature of the strategy and what it intends to do. The mechanism will allow the investors to clearly see what additional value does the fund bring in relation to conventional investment products, he added.