We missed this earlier: Privately managed provident, superannuation, and gratuity funds can now invest 5% of their corpus in alternative investment funds (AIFs) such as venture capital funds, SME funds, infrastructure funds, and so on. The Finance Ministry permitted this through a gazette notification dated March 15, stating that non-government provident funds and others will be allowed in AIFs (of Category I and Category II) that have a minimum corpus of Rs 100 crore. The amendment will likely provide a new source of capital for startups in the country. Under SEBI's AIF regulations 2012, Category I AIFs are infrastructure funds, SME funds, venture capital funds, and social venture capital funds. Angel funds are a sub-category of VC funds and can presumably be invested in. Debt funds are also a kind of Category I fund. Real estate funds, private equity funds, funds for distressed assets, etc. are registered as Category II AIFs. The government has imposed the following conditions for such investments: Investment in permitted in AIFs with a minimum corpus of Rs 100 crore For Category II AIFs, at least 51% of the AIF funds have to be invested in either infrastructure, SME, venture, capital, or social welfare entities. Exposure to a single AIF cannot exceed 10% of the AIF size. This limit will not apply to a government-sponsored AIF. Funds have to ensure that investments not be made, directly or indirectly, in securities of companies/funds incorporated or operated outside India The sponsor of the AIF should not be the promoter or…
