The International Financial Services Centres Authority (IFSCA) has eased its fund management rules to make it more attractive for fund managers to set up shop at Gift IFSC.
The Fund Management Entity (FME) rules allow retail schemes, non-retail schemes (alternative investment funds), investment trusts and portfolio management services. As on March 31, 2024, there were 104 FMEs registered with IFSCA, with 92 non-retail ones.
The minimum corpus for schemes has been reduced from $5 million to $3 million. For open-ended schemes, the investment activities may commence upon achieving a corpus of $1 million and the minimum corpus of $3 million may be achieved within 12 months.
The minimum investment amount for PMS has been reduced to $75,000 from $150,000. Clients under PMS are also permitted to transfer their funds in a designated broking account which may be then managed by the FME under PMS, subject to certain safeguards.
The valuation of a scheme’s assets by an independent service provider is exempted for fund of funds if the underlying fund has already been valued.
The requirement to appoint key managerial personnel with the prior nod of IFSCA is done away with. FMEs may open branch or representative offices in other jurisdictions without prior approval from IFSCA for marketing their offerings and client service.
“The recent amendments by IFSCA are a significant step towards aligning GIFT IFSC with global financial hubs. 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 agility needed to scale efficiently,” said Jaiman Patel, Partner, EY India.
Non-retail schemes
For non-retail schemes, the contribution by the fund management entity (FME) and its associates in a scheme, currently restricted at 10 per cent, is permitted up to 100 per cent, provided the FME and its associates that invests in the scheme and their ultimate beneficiary owners are persons not resident in India. Such schemes will not invest more than one-third of their corpus in a single company and its associates.
The valuation of a non-retail scheme’s assets by an independent service provider is exempted for fund of funds scheme if the underlying fund has been valued by an independent service provider.
Retail schemes
The criteria of five years of experience in managing assets of $200 million and 25,000 investors may be evaluated by considering the experience of FME, its holding company or their subsidiaries.
The requirement of listing of close-ended retail schemes on recognized stock exchanges is made optional if minimum amount of investment by each investor in the scheme is at least $10,000.
Single company and single sector restrictions in a retail scheme will not apply to fund of funds scheme.
The cap of investment in single company by a sectoral, thematic or index scheme will be linked to the weightage of that company in the representative index that such scheme intends to benchmark with or 15 per cent, whichever is higher.
