Circular Issued by SEBI

The Securities and Exchange Board of India (SEBI) after deliberations on the recommendations of Alternative Investment Policy Advisory Committee (AIPAC) and Indian Private Equity and Venture Capital Association (IVCA) on the aspect of Performance Benchmarking for the Alternative Investments Industry, issued a circular on this matter.

The Alternative Investment Policy Advisory Committee (AIPAC) which was set up under the able leadership of Shri Narayana Murthy submitted its 2ndAIPAC committee report to the SEBI and the Ministry of Finance on 1st November 2016. This report deals in detail the need for performance benchmarking for AIFs in a country like India. Post the subsequent discussion & deliberations and tremendous contribution from the members the AIPAC committee as well as the working group members for benchmarking of AIFs under the aegis of SEBI, it has been possible to come to a stage where SEBI has put out a definitive circular on the applicability of the same. There was a greater call among the Industry to have more transparency in the Alternative Investment Funds universe which will greatly help instil confidence in the Investors and develop mutual trust. We have seen the Industry grow from Rs 0.31 lakh Cr. (USD 4.38 Bn) as of 31st Dec 2015 to Rs 4.51 lakh Cr. (USD 62.66 Bn) as of 31st March, 2021 in terms of the commitments raised. Kindly note that the numbers refer to only the SEBI registered AIFs portion of commitments raised and excludes all non AIF/Global funds operating in India. To achieve the objective of attracting large pools of long-term funds, the industry needs to equip itself in order to cater to the needs of the diverse set of investors it attracts. To fulfil this objective, three critical factors were identified:

disclosure of relevant fund-level information to its investors
enhanced fund-level governance and
aggregate data on industry-level performance to inform and thereby attract current and potential investors

Keeping the above in mind, the Securities and Exchange Board of India (SEBI) issued a circular SEBI/HO/IMD/DF6/CIR/P/2020/24 dated 5th February 2020 on Disclosure standards of AIFs and read along with SEBI circular SEBI/HO/IMD/DF6/CIR/P/2020/99 dated 12 June 2020, wherein under it notified implementation of performance benchmarking for Alternative Investment Funds (AIFs) with effect from 1st October, 2020 and is mandatory for all AIFs.

1. Appointment of Benchmarking Agencies

Pursuant to the circulars and IVCA’s eligibility to appoint one or more benchmarking agencies, IVCA has initially appointed CRISIL Limited, a premiere rating agency in India and recently appointed Preqin Limited, a premiere data service provider and benchmarking agency for alternatives industry globally as the benchmarking agencies for conducting benchmarking of AIFsand NSE Indices Limited (100% subsidiary. And not 0.00 % of National Stock Exchange of India Ltd.), one of the foremost indices company in India. They provide a variety of indices and index related services for the capital markets. The company owns and manages a portfolio of indices under the NIFTY brand of NSE, including the flagship index, the NIFTY 50.

2. Benchmarking Timeline

The first Industry benchmarks for CAT I, II & III respectively, have been launched by CRISIL on 1st October 2020, followed by NSE Indices on 14th March, 2022 and Preqin on 25th May, 2022.

Subsequent to the initial benchmarks put out which focused on each of the three categories on an aggregate basis and a few vintages from 2014 onwards where there is a minimum number of registered AIFs; all three agencies have now launched sub category benchmarks.

The benchmarking agencies are expected to declare Performance Benchmarks on a bi-annual basis on the data as of September 30th & March 31st every year.

3. Reports

Every AIF which intends to raise funds in the country can obtain Performance Benchmarking Report from any of the three agencies at their option, the details of which can be included in its PPM and other marketing material.

In addition to the above, AIFs which are not raising any funds, but still wish to get a report from these agencies on performance of their schemes/ funds, they may also get a report.

The commercial considerations involved in procuring such benchmarking reports and usage of benchmarks shall be obtaineddirectly from the respective agencies

4. Data Collection and NDA

The process of data collection is applicable for all AIFs/ Schemes of AIFs that are registered with SEBI, which shall be required to provide all the necessary information/data to these agencies as may be sought by it.

To this effect the AIF &the agency shall enter into a non-disclosure agreement. A standardized template has been finalized by each of the agency respectively for the sharing of data by AIFs for the purpose of benchmarking and will be communicated by the agency to AIFs by email. Please note IVCA does neither takes any responsibility nor involved in the process of data collection by the agencies and the confidentiality of the date.

Performance Benchmarking of AIFs

CRISIL AIF Benchmarks

CRISIL is the pioneer in benchmarks for the alternative investment funds (AIFs) industry in India. Our benchmarks cover all the three broad categories of AIFs – Category I, II and III – and provide investors with a metric to compare an AIF’s performance with the category average.

NSE Indices Ltd - AIF Benchmarks

The Nifty Alternative Investment Fund (AIF) Benchmark Report aims to provide the users insights into the aggregate historical performance of various categories of AIFs in India. This report will help the investors in comparing historical performances of various AIFs with their respective benchmarks and

Preqin - AIF Benchmarks

Preqin is proud to launch our first dedicated performance benchmark for India’s Alternative Investment Funds (AIFs) in partnership with the Indian Venture and Alternate Capital Association (IVCA) and under eligibility from the Securities and Exchange Board of India (SEBI). The benchmark comprises 296 schemes across Category I, II, and III AIFs for performance data as of March 31, 2021.