NISM Series XIX-D · Chapter 12: Fund Monitoring, Reporting and Exit

L1 · Foundation

Monitoring a Fund and the Reporting Rules Behind It

Why monitoring matters in an illiquid, blind-pool product, the nine specific responsibilities under Regulation 20, the six principles of the Stewardship Code, the transparency requirements of Regulation 22, record maintenance under Regulation 27, activity reporting to SEBI, and the Compliance Test Report.

27 min read · Worth 10% of the paper · Written from pages 282–304 of the official NISM workbook · Updated 18 September 2026

Monitoring a Fund and the Reporting Rules

12.1 Why monitoring is not optional

The mistake investors make. Because alternative investments are long-term and illiquid, investors may assume that there is little to be done during the fund cycle once the due diligence process has been completed and the commitment to the fund has been made. The workbook's answer is flat: this is far from the truth.

Ongoing fund monitoring throughout its life cycle is a necessary control mechanism. While investment managers do their job of maximising returns at fund level by regularly making, monitoring, nurturing and exiting underlying investments, it is necessary for them to report the fund performance on an on-going basis to investors.

12.1.1 The context and scope of effective monitoring

Monitoring is part of a larger control system within the investment process.

The problem it has to work around: because of the illiquidity of an AIF, the investor's ability to react to different situations is somewhat limited. So the remedies are collective rather than individual: in complex problems, a solution will require finding a consensus with the fund manager and the other co-investors, or building alliances with co-investors to exercise pressure and act jointly.

Two further benefits of monitoring that are easy to overlook:

In the context of a co-investment strategy, monitoring is important for screening interesting investment opportunities that may arise. The investor sees the deals before anyone outside does.
Lessons learned from monitoring can be applied in the future to improve the due diligence process and the selection of future investments.

The two channels: focus should be both on providing standardised formal reporting information and on informal interactions with the investors and the investment committee or board of directors of the fund. Formal reports alone are not monitoring.

The behavioural warning

Investing in and monitoring AIF investments involve more effort and higher costs relative to on-market investment funds. And the workbook then issues a two-sided caution that a distributor must pass on:

AIF investors have to be made aware of the need to be patient and understanding, especially during the early years of a fund's lifetime.
By the same logic, investors' reaction should not be typically too little, too late, when things need to be addressed urgently to prevent further deterioration of the fund's outcome. So they need to be goaded to take action in time.

Patience in year two; urgency in year six. Both are failures of judgement if applied at the wrong moment.

What monitoring is - and what it is not

Fund monitoring is an integral part of ensuring compliance with fund objectives, the terms of the contribution agreement, and for gathering information.

Fund monitoring should NOT be confused with fund management, an activity in which, in accordance with the contribution agreement, the investors have no involvement.

Monitoring is an oversight process on:

overall asset allocation
portfolio composition
fund governance
performance

Investors must also keep track of internal and external risk factors that may have a bearing on the AIF's working and outcome.

Two consequences of blind-pool, illiquid investing

1. Set the risk profile at the time of commitment. Because of the blind-pool nature of AIF investing (ignoring co-investments), it is crucial for investors to set the risk profile of their investment at the time of commitment. You cannot set it later.

2. Rebalancing is not available. Given the AIF's lack of liquidity, the investor cannot easily adjust portfolio holdings or rebalance them if the manager has to undertake actions that are in variance with fund documentation. It requires effective communication and dialogue between the manager and the investors to seek appropriate redirections.

And a nuance that cuts the other way: there are risks associated with adhering too closely to a declared investment strategy, especially when market conditions change significantly, creating new opportunities. Investors have to be made aware of the need to keep this aspect in mind as well.

A manager who rigidly follows a strategy written four years ago into a market that no longer exists is not being disciplined; he is being negligent. The right answer is dialogue, not either blind adherence or unilateral drift.

12.2 The regulatory framework - Regulation 20

The general duty: the AIF shall review policies and procedures, and their implementation, on a regular basis, or as a result of business developments, to ensure their continued appropriateness. This means the investment manager and its officers need to engage on a regular basis to monitor the fund's policies and performance.

The nine specific responsibilities

1. Code of Conduct compliance. The Manager and either the trustee or trustee company or the Board of Directors or the designated partners of the AIF shall ensure compliance by the AIF with the Code of Conduct specified in the Fourth Schedule to the AIF Regulations.

2. Detailed policies and procedures. All AIFs shall have detailed policies and procedures, approved JOINTLY by the Investment Manager and the trustee or trustee company or Board of Directors or designated partners, to ensure all the decisions of the AIF comply with the AIF Regulations, the terms of the placement memorandum, agreements made with investors, other fund documents, applicable laws and internal policies of the AIF. And critically: the Investment Manager shall be responsible for every such decision meeting the aforesaid compliance.

3. Investment Committee. The Manager may constitute an Investment Committee (by whatever name called) to approve the decisions of the AIF. It shall function under the conditions specified by SEBI and shall be responsible for the compliance specified under (2) above - though this requirement does not apply when waivers are issued by SEBI to Large Value Funds meeting specified requirements, or in other specific cases.

4. Custodian. The Sponsor or Investment Manager shall appoint a custodian registered with SEBI for safekeeping of the securities or goods of the fund.

5. Segregation and ring-fencing. The Investment Manager and the trustee or trustee company or Board of Directors or designated partners shall ensure that the assets and liabilities of each scheme of the AIF are segregated and ring-fenced from other schemes, and that bank accounts and securities accounts of each scheme are segregated and ring-fenced.

6. Material change intimation. AIFs shall inform SEBI in case of any material change from the information provided at the time of application for registration.

7. Prior approval for change of control. In case of change of Sponsor or Investment Manager, or change in control of the AIF, Sponsor or Investment Manager, prior approval from SEBI shall be taken.

8. Restriction on advisory services. The Investment Manager shall not provide advisory services to any investor other than the investors of a Co-investment scheme or clients of a Co-investment Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 2020, for investment in securities of investee companies where the AIF managed by it makes an investment.

9. Compliance Officer. The Investment Manager shall appoint a Compliance Officer responsible for monitoring compliance with the Act, rules, regulations, notifications, circulars, guidelines, instructions or any other directives issued by SEBI, and such compliance officer shall independently report any deviation to SEBI forthwith within 7 working days.

Note the word independently in responsibility 9. The compliance officer reports to SEBI directly, not through the manager who may be the source of the deviation.

12.2.1 The Stewardship Code - six principles

A framework on Stewardship Code was introduced for mandatory compliance in case of AIFs' LISTED investments.

Principle 1 - Formulate, disclose, review. AIFs should formulate a comprehensive policy on the discharge of their stewardship responsibilities, publicly disclose it, review and update it periodically. Stewardship responsibilities include monitoring and actively engaging with investee companies on performance (operational, financial), strategy, corporate governance (including board structure and remuneration), material ESG opportunities or risks, and capital structure. Engagement may be through detailed discussions with management, interaction with investee company boards, and voting in board or shareholders meetings. The updated policy should be publicly disclosed on the entity's website.

Principle 2 - Manage conflicts of interest. AIFs should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities, and publicly disclose it. The policy shall be intended to ensure that the interest of the client or beneficiary is placed before the interest of the entity, and should also address how matters are handled when the interests of clients or beneficiaries diverge from each other.

Principle 3 - Monitor continuously. AIFs should monitor their investee companies continuously, which shall be in the form of a policy. The policy shall address the areas and extent of monitoring, including situations that do not require monitoring, and should keep in mind regulations on insider trading while seeking information from investee companies for the purpose of monitoring.

That last clause matters in practice. An AIF that asks an investee company for unpublished price sensitive information becomes an insider, and its ability to trade is frozen.

Principle 4 - Intervention and collaboration. AIFs should have a clear policy on intervention in their investee companies, and a clear policy for collaboration with other institutional investors where required, to preserve the interests of the ultimate investors, which should be disclosed. The policy shall identify the circumstances for active intervention and the manner of such intervention. Mechanisms may include meetings or discussions with the management for constructive resolution of the issue and, in case of escalation, meetings with the boards, collaboration with other investors, and voting against decisions.

Principle 5 - Voting and disclosure of voting. AIFs should have a clear policy on voting and disclosure of voting activity. The reasoning is pointed: it is critical that institutional investors take their own voting decisions in the investee company after in-depth analysis, rather than blindly supporting the management decisions. This requires a comprehensive voting policy including details of mechanisms of voting, circumstances in which voting should be for, against or abstain, and disclosure of voting.

Principle 6 - Report periodically. AIFs should report periodically on their stewardship activities. Institutional investors shall report to their clients or beneficiaries periodically on how they have fulfilled their stewardship responsibilities as per their policy, in an easy-to-understand format. It may also be placed on their website.

12.2.2 Transparency and periodic disclosure - Regulation 22

All AIFs shall ensure transparency and disclosure of information to investors on:

(a) financial, risk management, operational, portfolio and transactional information regarding fund investments (b) any fees ascribed to the Manager or Sponsor; and any fees charged to the AIF or any investee company by an associate of the Manager or Sponsor (c) any inquiries or legal actions by legal or regulatory bodies in any jurisdiction, as and when occurred (d) any material liability arising during the AIF's tenure, as and when occurred (e) any breach of a provision of the placement memorandum or agreement made with the investor or any other fund documents, as and when occurred (f) change in control of the Sponsor or Manager or Investee Company (g) any significant change in the key investment team (h) information for systemic risk purposes when required by SEBI, including the identification, analysis and mitigation of systemic risks

Systemic risk defined: business practices that may lead to a wider financial risk for an AIF much beyond a particular investment risk. The workbook's example: if an AIF is heavily invested in a particular sector and there are sectoral issues, a larger part of the AIF portfolio may face a risk of erosion in value.

The annual report to investors - the 180-day rule

Category I and II AIFs shall provide, at least on an annual basis, within 180 days from the year end, reports to investors including:

A. Financial information of investee companies

B. Material risks and how they are managed, including:

#	Risk	Level at which reported
i	Concentration risk	Fund level
ii	Foreign exchange risk	Fund level
iii	Leverage risk	Fund AND investee company levels
iv	Realisation risk (change in exit environment)	Fund AND investee company levels
v	Strategy risk (change in or divergence from business strategy)	Investee company level
vi	Reputation risk	Investee company level
vii	Extra financial risks, including environmental, social and corporate governance risks	Fund AND investee company level

The levels are examinable. Concentration and foreign exchange are fund-level only; strategy and reputation are investee-company-level only; leverage, realisation and ESG are both.

12.2.3 Maintenance of records - Regulation 27

The Manager or Sponsor shall maintain the following records:

(a) the assets under the scheme or fund (b) valuation policies and practices (c) investment strategies (d) particulars of investors and their contribution (e) rationale for investments made

All the above records are required to be maintained for a period of FIVE YEARS AFTER THE WINDING UP of the fund.

Note that the five years run after winding up, not from the date of the record.

12.2.4 Submission of reports to SEBI - Regulation 28

SEBI may at any time call upon the AIF to file such reports as it may desire, with respect to the activities carried on by the AIF.

Two Activity Reports are required, submitted through the SEBI Intermediary Portal:

Report	Who	When
Comprehensive Annual Activity Report	All AIFs	At the end of March of every financial year, within 30 calendar days from the end of March
Limited Quarterly Activity Report	All AIFs	Within 15 calendar days from the end of each quarter, in the revised format specified by SEBI

The exception: no separate submission is required for the quarter ending March, since the Annual Activity Report already includes its data points.

And separately: all AIFs are required to intimate SEBI and investors about any changes in terms of PPM and other fund documents. These changes are to be reported on a consolidated manner within 1 month of the end of each financial year.

12.2.5 The Compliance Test Report

Who must file: the manager of a Category III AIF must prepare and submit a Compliance Test Report as per the prescribed format, to ensure proper compliance with the SEBI (AIF) Regulations and related circulars.

The timeline chain - all four dates are examinable:

Step	Who	Timeline
Submit the CTR to the Sponsor and the Trustee (in case of a trust)	Investment Manager	Within 30 days from the end of the financial year
Intimate observations and comments, if any	Sponsor / Trustee	Within 30 days from receipt of the CTR
Incorporate all necessary changes in the CTR	Investment Manager	Within 15 days from the date of receipt of observations and comments
Report any compliance violation observed in the CTR to SEBI	Sponsor / Trustee	At the earliest

Some components of the CTR

Disclosure item	The regulatory rule	What the CTR must state
Previously submitted information	The investment manager must report to SEBI any material changes in information previously submitted	Whether the AIF has informed SEBI about changes in information previously submitted, or if such information was misleading
Change in the investment strategy	Change in the investment strategy of the scheme has to be made with consent of at least two-thirds of unit holders by value of their investment	Whether there has been any alteration to the fund strategy during the year, and whether necessary approval was sought
Minimum corpus per scheme	Minimum corpus of any AIF scheme has to be Rs 20 crore	Whether each scheme of the AIF has a corpus of at least Rs 20 crore
Minimum investment amount	The minimum investment from every investor	Whether the fund added any new investors and took the prescribed minimum

Note the two-thirds by value threshold for a change in investment strategy - different from the 75 per cent by value thresholds that appear elsewhere in the AIF framework, and a favourite exam confusion.

Think of it like this

Monitoring is the school parent-teacher meeting, not teaching the class

A parent attends the PTM, reads the report card, asks about attendance and behaviour, and raises concerns with the teacher. What the parent does not do is stand at the blackboard. Fund monitoring is exactly that division: an oversight process on asset allocation, portfolio composition, governance and performance - and the workbook is explicit that it must not be confused with fund management, in which the investors have no involvement under the contribution agreement.

Illiquidity means you cannot switch queues, only talk to the counter

In a bank with three counters you simply move if your queue stalls. In an AIF there is one counter and no exit door - so the only remedy is to talk, and if talking alone does not work, to get the other people in the queue to speak with you. That is why the workbook says complex problems require finding a consensus with the fund manager and the other co-investors, or building alliances to exercise pressure and act jointly.

Patience in year two, urgency in year six

A farmer who digs up his seeds in the third week to check on them destroys the crop; a farmer who ignores a pest infestation in the third month loses it anyway. The workbook asks for both dispositions at the right moments - investors must be patient and understanding especially in the early years, and yet their reaction must not be too little, too late when things need addressing urgently. Judging which moment you are in is the whole skill.

Ring-fencing schemes is the joint family with separate kitchens

Two brothers live in one house but run separate kitchens, separate accounts and separate loans, so one brother's creditor cannot touch the other's provisions. Regulation 20 requires exactly this: the assets and liabilities of each scheme of the AIF must be segregated and ring-fenced from other schemes, and the bank accounts and securities accounts of each scheme must be segregated too.

The compliance officer is the fire alarm, not the fireman

A fire alarm is wired to sound whether or not the building manager wants it to - that independence is the entire point. The AIF compliance officer must independently report any deviation to SEBI forthwith within seven working days. If he had to route the report through the very manager who caused the deviation, the alarm would be connected to the arsonist.

Stewardship voting is the society member who reads the agenda

Most flat owners sign the proxy form and go back to their tea; one member actually reads the redevelopment proposal and votes against clause seven. SEBI's Principle 5 asks AIFs to be that member: it is critical that institutional investors take their own voting decisions after in-depth analysis, rather than blindly supporting the management decisions - and that they publish how they voted.

Systemic risk is the whole lane flooding, not one shop leaking

A shopkeeper can fix his own leaking roof. He cannot fix the drain that floods the entire lane every monsoon and shuts every shop at once. Systemic risk is business practice that creates wider financial risk beyond a particular investment - the workbook's example being a fund heavily invested in one sector, where a sectoral problem erodes a large part of the portfolio together.

Records for five years after winding up is the closed shop's account books

A trader who shuts his shop does not burn his ledgers the next morning - the tax department may come asking three years later. Regulation 27 works the same way: assets, valuation policies, investment strategies, investor particulars and the rationale for investments must be kept for five years AFTER the fund is wound up, not five years from when they were made.

Key terms in this chapter

180-day annual report: Category I and II AIFs must provide reports to investors at least annually, within 180 days from the year end, covering financial information of investee companies and the material risks and how they are managed.
Bidder exclusion rule: If a bidder or its related parties are investors in the Original Scheme, they shall not be provided exit from the Original Scheme out of that bid - closing the loophole of a bidder funding his own exit.
Blind-pool risk profiling: Because AIF investing is a blind pool and the fund is illiquid, the investor must set the risk profile of his investment at the time of commitment - he cannot easily adjust or rebalance holdings later if the manager acts at variance with fund documentation.
Compliance Officer of an AIF: Appointed by the Investment Manager to monitor compliance with the Act, rules, regulations, circulars and directives issued by SEBI, and required to independently report any deviation to SEBI forthwith within seven working days.
Compliance Test Report (CTR): Prepared and submitted by the manager of a Category III AIF within 30 days from the end of the financial year to the Sponsor and Trustee; observations come back within 30 days, changes are incorporated within 15 days, and any compliance violation observed must be reported to SEBI at the earliest.
Comprehensive Annual Activity Report: Submitted by all AIFs on the SEBI Intermediary Portal at the end of March of every financial year, within 30 calendar days from the end of March.
Control (company sponsor or manager): The right to appoint the majority of the directors or to control the management or policy decisions, exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of shareholding, management rights, shareholders' agreements, voting agreements or in any other manner.
Controlling interest (other entities): For a sponsor that is not a company, control means any change in legal formation or ownership or change in controlling interest, where controlling interest is an interest, direct or indirect, of not less than fifty per cent of voting rights or interest.
Corporate liquidation exit: The least preferred and worst case exit - a statutory process taking a long time and providing only salvage value, usually where the investee company has become bankrupt. Liquidation preference rights, or holding the investment as venture debt which ranks above equity, are the protections against it.
Dissolution Period: The period following expiry of the liquidation period for liquidating the scheme's unliquidated investments, entered only with the consent of at least 75 per cent of investors by value, and preceded by disclosure of the proposed tenure, details of unliquidated investments, value recognition for benchmarking, and an indicative range of bid value with valuation by two independent valuers.
Dissolution Period filing: A scheme entering a dissolution period must file, through a merchant banker, an Information Memorandum along with the merchant banker's Due Diligence Certificate with SEBI, before the expiry of the liquidation period or any extension of it.
Dissolution Period limits: It shall not be more than the original tenure of the scheme, shall not be extended in any manner on expiry, and during it the scheme shall accept no fresh commitment from any investor and make no new investments.
Fund monitoring: An oversight process on overall asset allocation, portfolio composition, fund governance and performance, and part of ensuring compliance with fund objectives and the terms of the contribution agreement. It must not be confused with fund management, in which investors have no involvement under the contribution agreement.
Inoperative Fund: A status a scheme may obtain from SEBI either where it has retained amounts beyond permissible fund life and intends to surrender registration, or where it has no retained money but wishes to continue registration solely in anticipation of a favourable outcome in pending litigation. It may launch no new schemes and charge no management fees.
Inoperative Fund annual status report: A report on retained amount and outstanding liabilities submitted to SEBI and investors in SEBI's format on the SEBI Intermediaries Portal, within 30 calendar days from the end of March of every financial year, and including the valuation and updated NAV reported to depositories.
In-specie distribution: Distribution of unliquidated securities themselves to investors instead of cash, made during the Liquidation Period after approval of at least 75 per cent of investors by value of their investment in the Original Scheme.
Limited Quarterly Activity Report: Submitted by all AIFs within 15 calendar days from the end of each quarter in SEBI's revised format, with no separate submission required for the quarter ending March since the Annual Activity Report already covers its data points.
Liquidation Period: A period of one year following the expiry of the tenure or extended tenure of an AIF scheme, for fully liquidating the assets of that scheme, with proceeds distributed to investors after satisfying all liabilities.
Liquidation Scheme: A close-ended AIF scheme launched only to liquidate the unliquidated investments of an existing scheme whose tenure has expired. SEBI has notified that no AIF shall launch any new Liquidation Schemes after 25 April 2024.
Manager's disclosure dilemma: The tension between the statutory obligation to disclose and the risk that detailed information may impact follow-on fund raising if performance is poor, dilute the competitive edge of portfolio companies or deals in the pipeline, breach portfolio company data privacy, or create legal complications from leakage of proprietary fund information.
Mandatory exit option: The exit that must be offered to close-ended fund investors on a material change or change of control - with at least one month to dissent, buy-out by the manager at not less than the average of two independent valuations, costs borne by the manager or incoming sponsor, and completion within three months of the dissent deadline. It does not apply where at least 75 per cent of unit holders by value approve the change.
Mandatory in-specie distribution: Where an AIF scheme fails to obtain the requisite 75 per cent investor consent, unliquidated investments are distributed in-specie without that consent, at One Rupee; an investor unwilling to accept that valuation must write off the investment.
Material change in the PPM: A change in PPM disclosures or fund documentation terms amounting to a material departure, which may be construed as a change in the fundamental attributes of the fund or scheme, and which significantly influences the investor's decision to continue being invested.
Offer for Sale exit through an IPO: A secondary share sale of the AIF's holdings in the IPO market at the IPO price - by and large the most preferred and attractive exit for an equity-oriented AIF and historically the best-yielding, though long drawn and market-sensitive.
One Rupee distribution: The value at which unliquidated investments are distributed in-specie where the AIF fails to arrange bids for a minimum of 25 per cent of their value, or where requisite investor consent is not obtained - recorded for the manager's track record and reported to Performance Benchmarking Agencies.
Permitted parking of retained amounts: Amounts retained beyond fund life must be invested in liquid mutual funds, bank deposits or other high-quality liquid assets such as Treasury bills, Triparty Repo Dealing and Settlement, commercial papers and certificates of deposit, until distribution to investors.
Put option: A contractual right under an investment agreement giving the holder the right but not the obligation to sell the security back as per the terms of the agreement; the price is usually specified as a formula to avoid ambiguity, and in large cases guarantees a certain return or IRR.
Regulation 20 general duty: The AIF shall review its policies and procedures, and their implementation, on a regular basis or as a result of business developments, to ensure their continued appropriateness.
Regulation 27 record maintenance: The Manager or Sponsor must maintain records of assets under the scheme, valuation policies and practices, investment strategies, particulars of investors and their contribution, and the rationale for investments made - for five years after the winding up of the fund.
Residual put option: A put that promoters stipulate shall not be exercisable unless the company does not go public within an agreed time frame, or the AIF could not avail of other exit mechanisms.
Restriction on advisory services: The Investment Manager shall not provide advisory services to any investor other than investors of a Co-investment scheme or clients of a Co-investment Portfolio Manager, for investment in securities of investee companies where the AIF it manages invests.
Retention of liquidation proceeds: Proceeds may be retained beyond permissible fund life on any one of three grounds - demonstrable receipt of a litigation notice or demand, consent of at least 75 per cent of investors by value for anticipated litigation or tax liabilities, or substantiated residual winding-up expenses subject to a maximum of three years from the end of permissible fund life.
Risk reporting levels: Concentration and foreign exchange risk are reported at fund level; strategy and reputation risk at investee company level; leverage, realisation and extra-financial ESG risks at both fund and investee company levels.
Secondaries: Sale of existing unit capital or partnership interests by an investor to co-investors or outside investors. Outstanding commitments usually transfer to the incoming investor; pricing is negotiated, often at a substantial discount to NAV; and in India secondaries are yet to evolve into an organised market.
Secondary sale (trade sale): Exit through a secondary stake sale to a third party, often another AIF that assumes the selling fund's position - typically a VC fund taken over by a later-stage PE fund. Appropriate when the IPO option is not feasible and the investment horizon is complete.
Segregation and ring-fencing of schemes: The Investment Manager and the trustee, trustee company, Board of Directors or designated partners must ensure that the assets and liabilities of each scheme are segregated and ring-fenced from other schemes, and that each scheme's bank accounts and securities accounts are separately maintained.
Stewardship Code for AIFs: A framework of six principles introduced for mandatory compliance in respect of AIFs' listed investments - covering a disclosed stewardship policy, a conflicts policy, continuous monitoring, intervention and collaboration, voting and disclosure of voting, and periodic reporting on stewardship activities.
Stewardship Principle 5 (voting): AIFs must have a clear policy on voting and disclosure of voting activity, because it is critical that institutional investors take their own voting decisions after in-depth analysis rather than blindly supporting management decisions.
Strategic sale (M&A exit): Sale to a corporate buyer, either a competitor in the same industry or a larger company seeking entry into it, which can provide a substantial strategic premium. Usually the second most preferred exit after an IPO.
Surrender of the Certificate of Registration: Upon completion of the winding up of the fund by any of the permitted processes, the Certificate of Registration shall be surrendered to SEBI.
Systemic risk: Business practices that may lead to a wider financial risk for an AIF much beyond a particular investment risk - for example, heavy investment in one sector, where sectoral problems erode a large part of the portfolio at once. AIFs must provide SEBI with information for systemic risk purposes when required.
Twenty-five per cent bid requirement: On receiving investor approval for in-specie distribution, the AIF must arrange bids for a minimum of 25 per cent of the value of the unliquidated investments, for units representing the consolidated value of each unliquidated investment, with valuation by two independent valuers disclosed alongside the bid values.
Two-thirds consent for strategy change: A change in the investment strategy of a scheme must be made with the consent of at least two-thirds of unit holders by value of their investment - a threshold distinct from the several 75 per cent thresholds elsewhere in the AIF framework.
Vintage funds and mature funds: Vintage funds are those that have completed fund close; mature funds are those closer to harvesting their portfolio and completing their fund cycle, for whom exit prospects and execution become very important disclosures.
Winding up circumstances (Regulation 29): When the tenure of the AIF or all its schemes as stated in the PPM is over; if the trustees or trustee company are of the opinion that winding up is in the interests of investors; if 75 per cent of investors by value pass a resolution to wind up; or if SEBI so directs in the interests of investors.

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Original explanatory writing based on the official NISM workbook for Series XIX-D, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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