CRISIL on Thursday announced the launch of benchmarks for alternative investment funds (AIFs), against which investors can measure their performance.
AIFs are sophisticated investment vehicles for the wealthy. They have a minimum investment of Rs 1 crore. The rating agency said in a statement that the benchmarks would be across the three AIF categories.
The first includes VC funds and infrastructure funds, among others. The second includes PE funds and funds that do not make use of leverage. The third makes use of complex trading strategies and leverage, such as hedge funds.
Since many of these invest in illiquid securities or instruments that are not widely traded, returns are difficult to benchmark. This is unlike more the common investment schemes such as equity MFs, which can be benchmarked against an index like the Sensex.
The Securities and Exchange Board of India had brought in benchmarking for AIFs through a circular in February. This followed a consultation paper issued in December 2019. The benchmarks were scheduled to be ready by July 1. The regulator had extended the deadline to October, citing Covid-19.
CRISIL collected data from various funds to help formulate the benchmarks.
“The launch of AIF benchmarks by CRISIL will plug help this gap by providing a metric to compare the performance of AIFs with the category average,” said Nagarajan Narasimhan, senior director at CRISIL Research, in a statement.
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