As India's alternative investment fund (AIF) industry grows, the regulatory challenge is increasingly shifting towards identifying risks across private markets, including those arising from concentration, leverage, valuation practices and links between market participants.
At the 4th CII AIF Summit, SEBI whole-time member Sandeep Pradhan said, "The objective should not be to collect more information merely for the sake of reporting but to collect the right information and use it intelligently."
He identified concentration, leverage, valuation practices and interconnectedness as areas where better-quality information would help regulators understand emerging risks. Investors, too, need reliable information to assess the performance and value of their investments, he added.
With AIF investments growing at a compound annual growth rate (CAGR) of 27 per cent over the past five years, the industry has reached a different stage of development. Pradhan said the focus was no longer only on enabling alternative capital to develop, but also on balancing the industry's demand for flexibility with the need for stronger governance and investor protection.
"On one hand, the industry is seeking greater flexibility, whether in relation to investment structure, co-investment, leverage, governance or differentiated rights for sophisticated investors," he said.