Alternative Investment Funds (AIFs) have grown into a ₹10+ lakh crore industry in India. The trustee's role in AIF governance has evolved significantly under SEBI's AIF Regulations 2012, with the most recent updates in 2024.
Understanding AIF categories
SEBI classifies AIFs into three categories based on investment strategy:
- Category I: Investments in start-ups, SMEs, social ventures, and infrastructure
- Category II: Private equity, debt funds, and real estate funds
- Category III: Hedge funds and other AIFs using complex strategies
Each category has distinct compliance requirements, and the trustee's oversight responsibilities vary accordingly.
Key trustee duties across categories
While specifics differ, AIF trustees generally must:
- Oversee fund manager compliance with the placement memorandum
- Monitor adherence to investment restrictions per AIF Regulations
- Verify NAV calculations and unit-holder communications
- Address investor grievances within mandated timelines
- File quarterly compliance certificates with SEBI
Common pitfalls
From our experience trusteeing 80+ AIFs across all three categories, we see recurring issues:
- Late investor reporting (cured by automated workflows)
- Investment restriction breaches (cured by pre-investment trustee approval gates)
- NAV calculation discrepancies (cured by independent NAV verification)
