Six hedge funds have registered with the Securities and Exchange Board of India (Sebi) in the last four months, taking the total number of alternate investment funds (AIFs) from 21 in December to 47 in April.
According to data available with Sebi, the total number of entities registered with Sebi to operate as hedge funds has risen to 10. Ambit Alpha Fund, Karvy Capital Alternative Investment Trust, UNIFI AIF and Harmony AIF, among others, received the Sebi go-ahead this year. These entities have been granted registration as Category 3 funds that cover all those that employ diverse or complex trading strategies and also leverage, including through investment in listed or unlisted derivatives. Sebi notified the AIF norms in May 2012, which regulate all private equity players, venture funds, real estate funds and even hedge funds. The regulator has created three broad categories of funds based on the investment style and the potential impact on the markets and the economy.
While notifying the new norms, Sebi allowed existing funds that fell within the ambit of AIF norms to continue operations for six months, which, in special cases, could extend for 12 months, before getting registered under the new guidelines. However, such funds were not allowed to raise any fresh funds other than commitments already made till registration was granted. The highest number of registrations, however, has been under Category 2 that includes those that do not undertake leverage or borrowing other than to meet day-to-day operational requirements. A total of 24 entities have been granted approval to operate as Category 2 funds, typically, aimed at private equity funds or debt funds.
Category 1 has seen 13 registrations with funds backed by IFCI, IL&FS, L&T, Sidbi and Srei, along with entities like Lotuspool Fund, Incube Connect Fund, India Agriculture Trust and Manufacturing Value Addition Fund, receiving the Sebi approval. Category I AIF includes those that invest in start-up, early stage ventures, social ventures, SMEs, infrastructure or other sectors that the government or regulators consider as socially or economically desirable.