Finmin notifies changes to the investment pattern of these funds
The government has brought in changes to the investment pattern for non-government provident funds, and superannuation and gratuity funds, enabling them to invest up to 5 per cent in the units of Category I and Category II alternative investment funds (AIFs), subject to some caveats.
The development is part of the central government’s strategy to channelise domestic savings and improve their returns to attract more investment in the said sectors.
At present, these funds typically invest a minimum 45 per cent in government securities, besides new instruments, such as exchange-traded funds and real estate investment funds, while a portion in equity-related instruments.
According to the finance ministry’s notification, these funds have to comply with certain conditions for investment, such as size and class of AIFs, and investment concentration. Some of the conditions provide that investments should be in those AIFs that invest in infrastructure, SME, venture capital, and social welfare.
Giving an overview of the caveats, the ministry said these funds will invest only in those AIFs corpus of which is equal to or more than Rs 100 crore. Exposure to a single AIF shall not exceed 10 per cent of the AIF size. However, this limit won’t apply to a government-sponsored AIF. Funds must ensure that investment is not be made directly or indirectly in securities of the companies or funds incorporated and/or operated outside India.
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