Final Close
The date that ends fund-raising for a Category III AIF scheme — after it, a close-ended scheme accepts no new investors, and only then may its units be listed.
In plain language
Raising a fund happens in stages. The manager declares a first close once enough commitments are in, starts investing, and keeps accepting subsequent contributions. The final close is the last stop: it marks the end of the fund-raising process for that scheme.
The terms of the fund specify that the final close will happen not later than a specified period after the first close, with necessary approvals. That period is set in the PPM and, per the workbook, could be lower or higher than 1 year.
Investors who come in at the final close have an advantage over first-close investors: they can see how the scheme has performed between the two dates before committing.
How it works
What changes at final close
| Before final close | After final close |
|---|---|
| Manager may accept subsequent contributions and declare subsequent closes | A close-ended scheme cannot accept more investors |
| Units cannot be listed | Units of a close-ended scheme may be listed on a recognised stock exchange (voluntary), with a minimum tradable lot of Rs 1 crore |
An open-ended Category III AIF is different: it can accept money from investors at any time after its initial offer period.
Tenure — which close counts? Since SEBI's circular of 17 November 2022, tenure of a close-ended scheme is computed from the first close. Schemes that declared first close before 17 November 2022 may continue to calculate tenure from the final close; those still to declare final close must do so on the PPM timeline, with no discretion to extend it.
Where it appears in the documents. The PPM's principal terms show targeted collection amounts at first close and final close; its "Term of the Fund/Scheme" section states the final closing date; and a pitch book lists the dates of first close and final close. In Table 5.1, final close is Step 8 — approaching investors to reach the total target corpus and close fund-raising.
Commitment period. Chapter 4 says commitment periods for close-ended funds typically run 3–5 years from the final closing date.
A worked example
Workbook dates. Fund LMN's close-ended scheme "LMN Growth Fund I" (Rs 300 crore of commitments, 5-year tenure) declared first close on 15 November 2023. Its tenure runs from that date and ends 14 November 2028 — whenever its final close falls.
Illustrative extension. LMN declares final close on 15 September 2024, with Rs 300 crore raised.
Tenure start 15 Nov 2023 (first close — post-17 Nov 2022 rule)
Final close 15 Sep 2024 (fund-raising ends)
Tenure end 14 Nov 2028 (unchanged by the final close date)
Commitment period Chapter 4 guide: 3–5 years from 15 Sep 2024
In October 2024 a new family office asks to join. As a close-ended scheme past final close, LMN must refuse.
LMN then applies to list its units. Listing is permitted only after final close, with a minimum tradable lot of Rs 1 crore. The steps: application to the exchange → exchange in-principle approval → SEBI approval → exchange final approval.
Contrast a scheme whose first close was 1 October 2022, final close 1 April 2023, 4-year tenure. Having declared first close before 17 November 2022, it may keep counting tenure from final close — to 31 March 2027.
Why NISM asks about it
Chapter 3 (3.3.6) introduces first and final close. Chapter 5 (Regulatory Framework) covers them in depth at 5.7 — the tenure rule, the pre-17 November 2022 grandfathering, the ban on new investors after final close in close-ended schemes — plus listing after final close (5.10) and Step 8 of the fund-raising table. Chapter 4 ties the commitment period to the final closing date, and Chapter 10 lists first and final close dates in the pitch book.
Common exam traps
- Tenure runs from first close, not final close — except for schemes that declared first close before 17 November 2022.
- Close-ended schemes take no new investors after final close; open-ended schemes can accept money any time after the initial offer period.
- Listing is only after final close, is voluntary, and needs a minimum tradable lot of Rs 1 crore.
- The gap between first and final close is not fixed at 1 year — it is defined in the PPM and may be shorter or longer.
- Later investors are better informed, not better treated: they can study performance since first close.
- First close has a SEBI deadline (12 months from SEBI taking the PPM on record); final close follows the PPM's own timeline.
Check yourself
1.The Investment Manager should ensure that the first close of a scheme is declared within:
- a)6 months from the date of registration of the AIF with SEBI
- b)12 months from the date of SEBI communication for taking the PPM of the scheme on record
- c)12 months from the date of the first capital call
- d)24 months from the date of the final close
Show the answer
Answer: (b) 12 months from the date of SEBI communication for taking the PPM of the scheme on record
First close must be declared within 12 months from the date of SEBI communication for taking the Private Placement Memorandum of the scheme on record. First close represents a commitment by the Category III AIF to proceed with the fund and is a positive signal for other investors monitoring the fund-raising process. The manager then retains the right to accept subsequent contributions and declare subsequent close dates, with the final close occurring not later than a specified period after the first close.
Where this is taught
- Series XIX-B · Chapter 3: Introduction to Category III AIF Ecosystemintroduced here
- Series XIX-C · Chapter 7: Alternative Investment Funds Ecosystemintroduced here
- Series XIX-E · Chapter 15: Regulatory Frameworkintroduced here
- Series XIX-D · Chapter 14: Regulatory Frameworkintroduced here
Related terms
- Open-ended fundA mutual fund scheme with no maturity date that keeps selling and redeeming units directly after its NFO, at NAV-linked prices, so its number of units and unit capital change every day.
- Private placement memorandumThe offer document of a Category III AIF, filed with SEBI through a merchant banker at least 30 days before a scheme launches — and the document SEBI comments on but never approves.
- Capital CommitmentThe total amount an investor promises to contribute to a Category III AIF over the life of the fund — at least Rs 1 crore, or Rs 25 lakh for employees and directors of the AIF or its Manager.
- DrawdownThe process by which the manager of a Category III AIF calls committed capital from investors as the fund needs it — also known as a capital call.
- First CloseThe date an AIF scheme declares it has raised enough commitments to proceed — the point from which tenure, management fees and set-up cost amortisation all start running.
- Commitment PeriodThe window in a closed-ended fund during which the manager may call capital against commitments — and the period over which management fee is charged on committed rather than invested capital.
- CorpusThe total of all capital commitments raised by a Category III AIF scheme from its investors — not the cash actually collected, which SEBI requires to be at least Rs 20 crore.
- Closed-ended AIFAn AIF scheme offered for a limited period, funded by commitments drawn down through capital calls, with no redemption before the fund winds up — compulsory for Categories I and II.