The International Financial Services Centers Authority (IFSCA) has relaxed fund management rules to make it more attractive for fund managers to register with Gift IFSC.
The Fund Management Entity (FME) rules allow retail schemes, non-retail schemes (alternative investment funds), investment trusts and portfolio management services. As of March 31, 2024, there were 104 FMEs registered with IFSCA, of which 92 were non-retail companies.
The minimum corpus for schemes has been reduced from $5 million to $3 million. For open-ended schemes, investment activities can commence upon reaching a corpus of $1 million and the minimum corpus of $3 million can be achieved within 12 months.
The minimum investment amount for PMS has been reduced from $150,000 to $75,000. Customers under PMS are also permitted to transfer their funds to a designated securities account which can then be managed by the FME under PMS, subject to certain safeguards.
The valuation of a scheme’s assets by an independent service provider is exempt from a fund of funds if the underlying fund has already been valued.
The requirement to appoint key management personnel with the prior nod of the IFSCA is abolished. FMEs may open branches or representative offices in other jurisdictions for the marketing of their offerings and customer service without prior approval from IFSCA.
“The recent changes by IFSCA are an important step towards aligning GIFT IFSC with global financial centres. The reduction in minimum corpus requirements, flexibility in PMS investments and relaxed regulatory norms will not only attract new fund managers but also provide existing players with the operational flexibility required to scale efficiently,” said Jaiman Patel, Partner at EY India .
Non-retail arrangements
For non-retail schemes, the contribution of the fund management entity (FME) and its associates to a scheme, currently limited to 10 percent, is permitted up to 100 percent, provided that the FME and its associates investing in the scheme and their beneficial owners are persons who do not reside in India. Such programs will invest no more than one-third of their corpus in a single company and its associates.
The valuation of the assets of a non-retail fund by an independent service provider is exempt from a fund-of-fund scheme if the underlying fund has been valued by an independent service provider.
Retail arrangements
The criteria of five years of experience managing assets of $200 million and 25,000 investors can be evaluated by taking into account the experience of FME, its holding company or their subsidiaries.
The requirement for listing of close-ended retail programs on recognized exchanges is made optional if the minimum investment amount of each investor in the program is at least $10,000.
Single company and single sector restrictions in a retail scheme do not apply to a fund-of-fund scheme.
The maximum amount for investments in a single company by a sectoral, thematic or index plan will be linked to the weighting of that company in the representative index against which such a plan intends to benchmark, or to 15 percent, whichever is higher.
