Performance Report

Benchmarking Agencies do two different jobs, and the workbook gives each job its own name.

The first is the mandated one. The agency collects data from every AIF, builds industry benchmarks by category, and gives each fund a report of its own performance against them. That report is called a Benchmark Report.

The second is optional. A fund can ask the agency for a customised comparison — against a hand-picked set of peer funds that meet criteria the fund specifies. That report is called a Performance Report.

The naming is the whole point of the rule. A customised comparison, chosen by the fund being compared, must not be able to pass itself off as the regulator-mandated one.

Two conditions protect it. The agency needs the express consent of every fund whose data is used. And the service may be charged for, on terms the fund and the agency agree.

Where it sits. Chapter 8, section 8.8.1 (Benchmarking Agencies), in Box 8.6 Section B of SEBI's operational guidelines for performance benchmarking. Section A holds the mandated benchmarking; Section B holds this.

The five steps for a customised report (item m):

1. Identification of the set of AIFs that meet the particular criteria on which the customised report is to be generated.
2. That identification may be either on self-attestation by the relevant AIFs or by independent verification by the Benchmarking Agency.
3. Receipt of the express consent of the AIFs whose data is needed to create the report.
4. Preparation of customised performance reports may be a fee-based service, as decided mutually between the AIFs and the Benchmarking Agencies.
5. Customised reports so generated shall be called Performance Report, as against the nomenclature Benchmark Report, which is used for the standard benchmark reports generated on SEBI's mandate.

The mandated framework it sits beside (Section A).

Additional benchmarks may be created on objectively verifiable parameters such as instrument of investment, tenure or vintage of the fund and focus sectors — which is exactly the material a customised Performance Report draws on.

The valuation chain behind the data. SEBI requires the Manager to report portfolio valuation to benchmarking agencies on time. To do that, the Manager must build a specific timeframe for audited accounts into its subscription or investment agreement with each investee company, so that valuation based on the investee's audited data as on 31 March reaches the agencies within the specified timeline of 7 months, and only after the AIF's own books have been audited.

A divergence worth labelling. The published Benchmarking Agency page, written from the Series XIX-B workbook, states that timeline as 6 months. Series XIX-E's Chapter 8 gives 7 months. Teach the figure in the paper you are sitting.

Who the agencies are. The workbook names three appointed by IVCA — CRISIL, NSE and Preqin — publishing AIF benchmarks for all categories in INR and USD. For Category III AIFs the benchmarks are asset-weighted indices built from fund AUM and quarterly returns, computed on post-expense, pre-carry, pre-tax values, with fund selection depending on years completed since First Close.

The fund, the peer count and the fee are illustrative; the five steps, the consent requirement, the AUM basis and the nomenclature rule are the workbook's.

Meridian Absolute Return Fund — Scheme I completed First Close on 1 April two years ago, so it is past the 1 year mark and reports to its Benchmarking Agency half-yearly. Its AUM for benchmarking is the total capital drawn down: Rs 600 crore.

What it gets without asking. For the half year to 31 March, on audited data and pre-tax NAV, the agency gives it a Benchmark Report — its performance against the Category III industry benchmark, in INR and USD, with the basis of calculation attached.

What it asks for. The industry benchmark covers every Category III AIF since 2012, which includes long-only funds the manager considers irrelevant. So Meridian asks for a customised comparison against Category III AIFs that are long-short, of 2019 or later vintage, with AUM between Rs 400 crore and Rs 1,000 crore — all objectively verifiable parameters of the kind the guidelines allow.

Why step 3 is not a formality. Two funds declining cuts the peer set by a quarter. Meridian cannot substitute two other funds' numbers, because their data cannot be used without their express consent. A customised comparison is only as good as the consents behind it — and the fund asking for it does not control them.

Why step 5 is not cosmetic. Meridian may put the Benchmark Report figures into its marketing material as benchmarked performance derived by the agency. The Performance Report is a comparison against six peers Meridian itself specified. Calling that a Benchmark Report would let a self-selected peer group borrow the authority of a SEBI-mandated benchmark, which is precisely what the separate nomenclature prevents.

Chapter 8, section 8.8.1, with Box 8.6 — Section A for the mandated framework and Section B for this. The box is a numbered list of operational guidelines, which is the easiest possible shape to set questions from.

Expect: what a customised report is called (Performance Report) and what the standard one is called (Benchmark Report) — this nomenclature contrast is the single most likely question; whether consent is needed (express consent of the AIFs whose data is used); whether it is free (may be a fee-based service, mutually decided); and how the peer set may be identified (self-attestation or independent verification). Around it, expect the 33% association threshold, the 1 year from First Close, the half-yearly 30 September and 31 March cycle, audited 31 March / unaudited September, AUM as capital drawn down and pre-tax NAV.

• Performance Report versus Benchmark Report. The customised, fund-requested report is the Performance Report. The SEBI-mandated one is the Benchmark Report. Reversing them is the error the rule exists to prevent.
• The workbook uses two labels for the mandated report. Item (j) calls it a Performance Benchmark Report; item (v) calls the standard reports Benchmark Report. Both are the mandated output — what they are contrasted with is the customised Performance Report.
• Consent is express, and from the AIFs whose data is used — not from the requesting fund, and not implied by membership of the industry association.
• It is optional and may be paid for. The mandated benchmarking is not optional; the customised report is a service the agency may charge for on mutually agreed terms.
• Self-attestation is permitted. Identification of the peer set may be by self-attestation or independent verification — a question offering only independent verification is wrong.
• AUM here means capital drawn down, not committed capital and not NAV.
• Benchmarking runs on pre-tax NAV, and for Category III the benchmarks are computed post-expense, pre-carry and pre-tax. Three different adjustments, each testable.
• The valuation timeline differs between AIF papers. This workbook says 7 months for reporting valuations based on investee audited data as on 31 March; the sibling AIF paper behind the published Benchmarking Agency page says 6 months.