Finance Ministry allows domestic private provident funds to invest their surplus in certain AIFs

Finance Ministry allows domestic private provident funds to invest their surplus in certain AIFsFinance Ministry allows domestic private provident funds to invest their surplus in certain AIFs

The Finance Ministry has permitted homegrown private provident funds to put upto 5% of their excess in Alternative Investment Funds (AIFs) that back venture capital funds, SME Funds, social venture funds and infrastructure funds, among others. 

These funds might be permitted to put resources into organizations consolidated in India, the government said in a gazette notice on Tuesday. The move is required to offer more capital to startups in India who have been requesting private Indian pension funds to have the option to put resources into AIFs, notwithstanding foreign pension funds that are now permitted to do as such. 

An Alternative Investment Fund is basically any asset set up or consolidated in India which is a secretly pooled investment vehicle and gathers funds for contributing it, as indicated by a characterized investment strategy to assist its financial backers. 

"This won't just improve homegrown subsidizing for startups significantly, yet additionally increment gets back to pension reserve supporters," Anil Agrawal, Joint Secretary at the Department for Promotion of Industry and Internal Trade, said in a tweet. 

Also read: Zomato all set to launch its own line of fitness supplements soon

The funds can just put resources into AIFs with a base corpus of Rs 100 crore. The openness to a solitary AIF ought not surpass 10% of the specific AIF's all out size. Be that as it may, this cutoff won't have any significant bearing to a government-supported AIF. For Category II AIFs, at any rate 51% of the funds of such an AIF ought to be put resources into both of the infrastructure, SME, venture capital or social government assistance substances, the notice said. 

The backer of an AIF ought not be the advertiser in the pension asset, and AIFs can not be overseen by an investment administrator who is straightforwardly or in a roundabout way oversaw by that pension store. 

A senior official at the Employees' Provident Fund Organization (EPFO), which oversees more than Rs 12 lakh crore of retirement reserve funds, told the Economic Times that this could be a hazardous investment road and the association should look for endorsement from the EPFO's leading group of trustees before putting resources into AIFs.