Category Three AIF History
Globally, First CAT3AIF, came into use in 1949, by A.W.Jones & Co , Hedge Funds were described as any fund that use incentive fees, short selling, and leverage to maximise returns for the investors.
In India CAT3AIF, foreign investors were investing significant funds through Hedge Funds and Fund – of – Funds set up in offshore jurisdictions. Such funds invested directly in Indian Securities Market, or through offshore derivatives instruments ( ODIs), issued by Foreign Institutional Investors
(FII), against underlying Indian Securities. As at the end of 2004, the hedge funds accounted for abour 5 percent of the market value of the total assets held by the FIIs in India.
Eurekahedge India Long Short Equities Hedge Fund Index is an equally weighted index of 15 constituent funds. The index was designed to provide a broad measure of the performance of underlying hedge fund managers who invest exclusively in India. The index is base weighted at 100,
as on December 1999.
Historical Performance of Eurekahedge India Long Short Equities Hedge Fund Index, since inception
SEBI introduced the SEBI (Alternative Investment Funds) Regulations on May 21, 2012. These Regulations identified Hedge Funds under “Category III AIF”.
The period between 2012 and 2019 can be termed as the consolidation and transformation phase for the Category III AIF industry in India.
The AIF industry caught the fancy of the ultra-rich billionaires of India who numbered 169 in Forbes list of World’s Billionaires in April 2023.
Rationalization of Total Expense Ratio (TER) charged by equity-oriented Mutual Fund schemes, as per amendments made to SEBI (Mutual Funds) Regulations, have encouraged mutual fund managers to launch Category III AIFs in India and make investments, with greater flexibility.