Sebi proposes lowering investment limit for LVFs under AIF framework

Don't want to miss the best from Business Standard?

The Securities and Exchange Board of India (Sebi) has proposed lowering the minimum investment threshold for Large Value Funds (LVFs) launched under the alternative investment funds (AIF) framework.

 

The current minimum threshold for LVF AIFs is Rs 70 crore, which could be brought down to Rs 25 crore after the public consultation process is over. This move intends to broaden the investor base and enhance the participation of domestic institutions, which often have internal limits restricting high allocations to a single fund.

 

Sebi’s initiative also aims to make these LVF AIFs more accessible and attractive, especially to domestic institutional investors, while upholding the sophistication expected from accredited investors.

 

LVFs comprise schemes where each investor is an accredited investor and currently contributes at least Rs 70 crore. As of June 30, there are 62 LVF schemes, with commitments exceeding Rs 1.34 trillion. These schemes have made investments worth nearly Rs 60,000 crore. 

 

Sebi received industry feedback, which highlighted challenges with the high threshold and regulatory inconsistencies compared to Portfolio Management Services (PMS), which set the LVF benchmark at Rs 10 crore.

 

Domestic insurance firms, for instance, face tight exposure limits under regulatory mandates. Lowering the threshold is expected to enable more insurance companies to access LVF products.

 

Accredited investors are considered financially savvy and capable of hiring expert advisors, justifying relief from certain compliance and oversight requirements.

 

The proposals follow recommendations by Sebi’s Ease of Doing Business Working Group and the Alternative Investment Policy Advisory Committee, both advocating reduced entry barriers and relaxed compliance for LVFs.

 

Sebi is soliciting public comments on these proposals until August 29.