AIF aggregates investor funds and allocates them to various investment categories as defined by the Securities and Exchange Board of India (SEBI) for the benefit of investors.
Those who create an AIF are known as sponsors. The sponsor consists of a chosen partner in the case of a Limited Liability Partnership (LLP) and a promoter in the case of an organisation.
A manager or sponsor has an extensive list of responsibilities. Besides overseeing the AIF, the sponsor or manager makes sure that investors and SEBI are properly informed.
According to the SEBI (AIF) Regulation 2012, an individual or organisation designated to oversee the investments is known as an AIF manager. A sponsor may also serve as the fund’s manager.
A sponsor or manager in an AIF has several responsibilities
A manager or sponsor is a person who oversees AIF or its schemes. A manager or sponsor maintains a continuing interest in the AIF.
Category I and II AIFs should have a continuing interest of “Not less than 2.5% of the corpus or INR 5 crore, whichever is lower.”
Category III AIF should have a continuing interest of “Not less than 2.5% of the corpus or INR 50 lakh, whichever is lower.”
If the sponsor or manager charges fees to the AIF or the investee company, they must reveal those fees to the investor regularly.
A manager or sponsor is responsible for selecting a custodian.
The custodian needs to be registered with SEBI to keep securities safe. This must be done only when the AIF’s corpus exceeds ₹5 crore.
The sponsor of an AIF is responsible for making sure that the maximum amount of money that can be invested in an investee firm is limited to 25% of the corpus for Category I and II AIFs and 10% of the corpus for Category III AIFs.
In the case of a single plan, the AIF’s sponsor or manager is responsible for making sure that the maximum number of investors does not exceed 1000. However, it may have over 1000 investors when an AIF has many schemes.
Sponsors and managers must create and execute documented policies and procedures to detect, track, and mitigate conflicts of interest.
