The Securities and Exchange Board of India (SEBI) has notified the Securities and Exchange Board of India (Alternative Investment Funds) (Fifth Amendment) Regulations, 2021 which is in relation to co-investment made by investors of Alternative Investment Funds.
After clause (f) of sub-regulation (1) of regulation 2, the clause shall be inserted, namely, “(fa)“Co-investment” means investment made by a Manager or Sponsor or investor of Category I and II Alternative Investment Fund(s) in investee companies where such Category I or Category II Alternative Investment Fund(s) make investment. Provided that Co-investment by investors of Alternative Investment Fund shall be through a Co- investment Portfolio Manager as specified under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020”.
The terms of Co-investment in an investee company by a Manager or Sponsor or co- investor, shall not be more favourable than the terms of investment of the Alternative Investment Fund. Provided that the terms of exit from the Co-investment in an investee company including the timing of exit shall be identical to the terms applicable to that of exit of the Alternative Investment Fund. Provided further that the above proviso shall be applicable only for co-investment made from the date of coming into force of this regulation.
Category III Alternative Investment Funds shall invest not more than ten per cent of the net asset value in listed equity of an Investee Company and shall invest not more than ten per cent of the investable funds in securities other than listed equity of an Investee Company, directly or through investment in units of other Alternative Investment Funds.
Provided that large value funds for accredited investors of Category III Alternative Investment Funds may invest up to twenty per cent of the net asset value in listed equity of an Investee Company and may invest up to twenty per cent of the investable funds in securities other than listed equity of an Investee Company, directly or through investment in units of other Alternative Investment Funds
As per the regulation, the manager shall not provide advisory services to any investor other than the clients of Co- investment Portfolio Manager as specified in the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, for investment in securities of investee companies where the Alternative Investment Fund managed by it makes investment.
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