Sebi's Strategic Shift: Easier Investment Norms for Category II AIFs

Sebi proposes easing investment norms for Category II AIFs by allowing investments in listed debt securities with 'A' or below credit ratings. This move addresses the shrinking pool of unlisted debt securities post-LODR amendments. The regulator seeks public comments on the proposal, impacting 192 existing schemes.

The Securities and Exchange Board of India (Sebi) has put forward a proposal to ease investment norms for Category II Alternative Investment Funds (AIFs). This new direction would allow these funds to invest in listed debt securities possessing a credit rating of 'A' or below.

This proposal emerges in response to a dwindling number of investment opportunities within unlisted debt securities, following recent amendments to the Listing Obligations and Disclosure Requirements (LODR) norms. Due to these changes, listed companies are required to list all non-convertible debt (NCD) securities on stock exchanges.

Sebi has requested public feedback on this proposal until February 28. The move targets the existing 192 schemes of Category II AIFs, which have more than half of their investments in unlisted debt, thus aiming to ensure that AIFs continue playing a pivotal role in funding sectors without access to conventional financing.