Displaying Net Asset Value (NAV) of Alternative Investment Fund (AIF) units on depositories for enhanced transparency, as suggested by SEBI

Displaying Net Asset Value (NAV) of Alternative Investment Fund (AIF) units on depositories for enhanced transparency, as suggested by SEBI

SEBI Proposes Framework for AIFs to Report Net Asset Value

The Securities and Exchange Board of India (SEBI) has put forward a new framework that requires private equity, venture capital, and other alternative investment funds (AIFs) to report the net asset value (NAV) of their units to depositories.

Under this proposal, Category I and II AIFs, which include angle funds, PE/VC vehicles, real estate, and infrastructure funds, may need to undertake the valuation of their portfolio every six months or annually with investor approval. For Category III AIFs, which include hedge funds and PIPE funds, the valuation may need to be done more frequently, with the NAV being disclosed not later than every quarter for close-ended funds and not later than every month for open-ended ones.

In some cases, AIFs may need to engage an independent valuer to value their investments. However, Category III AIFs may be allowed to calculate their NAV internally. Once the valuation exercise is done, AIFs or Registrar and Transfer Agents (RTAs) may need to upload the NAV of AIF units in the depository system within 15 days.

The deadline for existing schemes to comply with the new circular once it comes into effect is 45 days. The depositories will need to provide the necessary infrastructure to operationalize this proposal.

It is important to note that the names of the AIFs dealing with SEBI's proposal on reporting the NAV of their units to the depositories are not publicly specified. SEBI has set a deadline for public comments and suggestions on the proposed framework for alternative investment funds (AIFs) to October 9.

The NAVs would be based on the value of their investments. The deadline for uploading the NAV would depend on whether an external auditor is involved or not. For example, if an external auditor is not involved, the deadline for uploading the NAV would be within 15 days of the valuation exercise. If an external auditor is involved, the deadline may be extended.

This new framework is part of SEBI's efforts to increase transparency and accountability in the AIF industry. By requiring AIFs to report their NAVs to depositories, investors will have a clearer understanding of the value of their investments and be able to make more informed decisions.

In conclusion, SEBI's proposal for AIFs to report their NAVs to depositories is a significant step towards increasing transparency and accountability in the AIF industry. With the deadline for public comments and suggestions on the proposed framework approaching, it will be interesting to see how the industry and investors react to this new development.

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