Major Turn Around in AIF; long awaited regulation finally approved by GON

The initiation of Alternative Investment Fund (AIF) as an investment vehicle includes Infrastructure fund, Private Equity (PE) and Venture Capital (VC) Fund, SMEs Fund, Hedge Fund and so on have been in operation since long but there was no legal frame work on exactly how to operate. Hence, with the release of Specialized Investment Fund Regulation on Falgun 27, 2075 brought milestone on the AIF industry.

It has been since long SEBON was been mooting regulation in this regard and finally it got approval from GON.

Major highlights of this regulation includes:

• AIF will be applicable for three major investment fund i.e. Private Equity, Hedge Fund and Venture Capital.
• Interested firms having the paid up value of Rs 2 crore and fulfilling all the requirements to perform as fund managers can obtain the permission from the board to begin operation, as per the board.
• The firms having the fund size of minimum Rs 15 crore can get permission to perform as equity fund, venture capital fund or hedge fund where the fund manager should maintain minimum stake of 2 % in the fund size.
• The regulation has also mandated the fund managers to sign a contract with the eligible investors before making investment and the investment could be made in any sector except those which are prohibited by the government.
• SEBON has set the locking period of 1 year for the equities of the fund managers from the date of their allotment. It has further clarified that it will soon come up with a separate directive for the hedge funds which will make investment in the highly risky sectors.

It can therefore be expected as a positive turn around in the Nepalese History of Alternative Investment Fund (AIF).