PFRDA (Pension Fund Regulatory and Development Authority)
What is PFRDA (Pension Fund Regulatory and Development Authority)?
PFRDA is the statutory authority established under the PFRDA Act, 2013, to regulate and develop India’s pension sector, including the National Pension System (NPS) and the Atal Pension Yojana. PFRDA sets the investment guidelines under which NPS pension fund managers allocate capital, including to AIFs and other alternative asset classes.
Why It Matters
PFRDA’s investment guidelines determine how one of India’s largest pools of long-term capital can be allocated. As PFRDA progressively opens NPS allocations to alternative assets, it creates significant LP capital opportunities for AIF managers.
Key Takeaways
- 1
Regulates India’s National Pension System and sets investment guidelines for pension fund managers.
- 2
Progressively permitting NPS allocations to alternative investments including AIFs.
- 3
Controls one of India’s largest pools of long-term institutional capital.
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SEBI (Securities and Exchange Board of India)
SEBI is India’s statutory regulatory authority for securities markets and investment funds, established under the SEBI Act, 1992. It regulates all Alternative Investment Funds (AIFs), mutual funds, portfolio managers, and market intermediaries operating in India.
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Category I AIFs under the SEBI (Alternative Investment Funds) Regulations, 2012, include funds that invest in start-ups, early-stage ventures, social ventures, SMEs, and infrastructure. These funds are considered to have positive spillover effects on the economy and may receive incentives or concessions from SEBI, the Government of India, or other regulators. Sub-categories include Venture Capital Funds, Angel Funds, Social Venture Funds, and Infrastructure Funds.
Read MoreSEBI AIF Category II
Category II AIFs are funds that do not fall under Category I or III and do not undertake leverage or borrowing other than to meet day-to-day operational requirements (up to a regulatory cap). This is the most common AIF category in India and includes private equity funds, debt funds, and fund of funds that do not qualify as Category I.
Read MoreSEBI AIF Category III
Category III AIFs under SEBI regulations employ diverse or complex trading strategies and may use leverage including through investment in listed or unlisted derivatives. These include hedge funds, PIPE (Private Investment in Public Equity) funds, and other funds that trade with a view to making short-term returns. They are subject to higher regulatory reporting requirements compared to Category I and II.
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