SEBI enhances the overseas investment limit of Alternative Investment Funds (AIFs), Venture Capital Funds (VCFs) to USD 1,500 million:
SEBI on 21 May 2021 vide its circular no. SEBI/HO/IMD/DF6/CIR/P/2021/565 has enhanced the overseas investment limit of SEBI registered AIFs and VCFs from USD 750 million to USD 1,500 million in consultation with RBI. The said circular of SEBI states as follows:
- In terms of SEBI Circulars No. SEBI/VCF/C IR No. 1/98645/2007 dated August 09, 2007, CIR/IMD/DF/7/2015 dated October 01, 2015, and SEBI/HO/IMD/DF1/CIR/P/2018/103/2018 dated July 3, 2018, SEBI registered AIFs and VCFs are permitted to invest overseas, subject to an overall limit of USD 750 million.
- In consultation with the Reserve Bank of India, the said limit has now been enhanced to USD 1,500 million. Further, all other regulations governing such overseas investment by eligible AIFs/VCFs shall remain unchanged.
- All other requirements, terms, and conditions specified in the aforesaid SEBI Circulars shall remain unchanged.
Earlier SEBI in 2015 had allowed AIFs to invest up to 25 percent percent of their investable corpus (fund size minus expenses) overseas and created a USD 500 million allowance for overseas investments in 2015. This was subject to the condition that the overseas investments would need to have an Indian connection. Further, SEBI had increased this to USD 750 million in 2018 but as the industry grew, the size of the previous allowance was becoming a bottleneck for Indian AIFs to invest overseas, with the allowance getting exhausted due to the sheer size of the industry and pace of investments.
In a highly globalized world, asset diversification in terms of geographies adds a significant alpha to a fund manager's performance. Now, the said doubling of the limit of overseas investment to USD 1,500 million will enable the AIFs/VCFs to invest overseas and generate strong returns for their investors.
The said SEBI circular may be accessed at the following link:
