Investment Manager

Every AIF needs someone whose full-time job is to find, structure and manage its investments. That person or firm is the Investment Manager. The fund's sponsor appoints the Investment Manager. Often the sponsor and the Investment Manager are the same firm.

Funds abroad often use a partnership structure. There, this role is called the General Partner, or GP. Investors in that structure are called "Limited Partners". Indian AIFs usually set up a separate investment management company instead. The fund managers who run the fund sit inside that company.

The workbook sets out five core functions of the investment manager: deal sourcing (identifying and completing transactions, and building the network of bankers, accountants and advisers that generates deal flow); structuring and investing (negotiating skilfully while managing the balance of incentives and risk); active management (hands-on monitoring of strategy without day-to-day operational control — the basis for treating AIF investment as an alternative model of corporate governance); harvesting returns (managing exits, arguably the most important skill given AIF illiquidity); and relationship management with investors (keeping them informed of fund progress and new developments).

The investment manager earns two kinds of remuneration: a salary or management fee for running the fund, and additional returns (carry) from the AIF's performance, based on the investment agreement's terms. Where the manager is also a contributory in a partnership structure — mandatory under Indian AIF regulation — it additionally shares in AIF returns as any other partner would.

Meridian Growth Capital LLP is appointed as investment manager to Meridian Category II AIF by its sponsor. Over the fund's life, Meridian's team sources 40 potential deals through its network of investment bankers and chartered accountants, structures and closes 6 of them, and actively monitors each portfolio company's board without taking day-to-day operational control.

For its work, Meridian earns a 1.75% annual management fee on the fund's corpus of Rs 200 crore — Rs 3.5 crore a year — plus, on a successful exit from one portfolio company at a large gain, an additional return (carry) computed under the fund's distribution waterfall once investors have received their capital back plus preferred return.

Any change in who serves as investment manager, or any change of control of the investment management company itself, must be informed to SEBI — and where control changes, prior SEBI approval is required before the change can take effect.

Chapter 3 (Concepts in the AIF Industry), section 3.1.4, sets out the investment manager's role directly within the private capital ecosystem, alongside sponsors, trustees and custodians. Expect the five functions (deal sourcing, structuring, active management, harvesting returns, investor relationship management) tested as a list, and the GP/LP terminology tested as an international-equivalent matching question.

• The investment manager may be the same entity as the sponsor — the two roles are not required to be held by different parties, though they often are in larger fund houses.
• "General Partner" is a partnership-structure naming convention, not a separate SEBI category — an Indian AIF structured as a trust has no formal GP, only an investment manager.
• Active management does not mean day-to-day operational control of investee companies — the workbook is explicit that AIF managers set and monitor strategy without taking over daily operations.
• A change of investment manager, or a change of control of the investment management company, requires SEBI notification, and prior approval where control changes — notification alone is not enough when control itself shifts.