Question 1

What is Benchmarking of AIF all about?

So far SEBI has issued two circulars relating to benchmarking, viz:

"Disclosure Standards for Alternative Investment Funds (AIFs) for PPM and Benchmarking" issued vide circular no. SEBI/HO/IMD/DF6/CIR/P/2020/24 dated February 5, 2020.
Clarifications with respect to "Disclosure Standards for Alternative Investment Funds (AIFs) for PPM and Benchmarking" issued vide circular no. SEBI/HO/IMD/DF6/CIR/P/2020/99 dated Jun 12, 2020.

Answer

With an intention to allow investors to understand the performance of an AIF and its comparative study across AIF industry and other asset classes, SEBI has mandated benchmarking of performance of AIFs. SEBI rightly believes that it is necessary to develop and standardise an industry benchmark to allow investors to take informed decisions.

Question 2

Who will do the Benchmarking?

Answer

Benchmarking Agencies notified by an association of AIFs (“Association”), which represent at least 33% of the number of AIFs shall carry out the benchmarking process. As on today i.e. June 23, 2020 the associations are in process of identifying and evaluating such agencies.

Question 3

Are the Benchmarking requirement applicable to all AIFs, or there are some exemptions?

Angel Funds registered under sub-category of "Venture Capital Fund" under Category I - AIF.
AIFs that are yet to complete one year from first close at the end of financial year.

Answer

Benchmarking requirements are applicable to AIFs / Schemes that have completed at least one year from first close as on March 31, 2020. Following AIFs are exempted from the requirement:

Question 4

What information would be required by benchmarking agencies to evaluate the performance of AIFs?

AIFs shall provide data on cash flows, valuation or any other details of their scheme-wise investments to the Benchmarking Agencies in the form and format required by each Benchmarking Agency.

The performance reporting and benchmarking shall be carried out on pre-tax Net Asset Value (NAV) of the Scheme.

Answer

SecMark can assist AIFs in getting the Benchmarking done on an end to end basis so that the AIFs can focus on their business. The assistance from SecMark can include:

Question 5

How can SecMark assist AIFs in Benchmarking process?

Preparation and collating of data in the format and templated provided by the Benchmarking Agencies which include scheme-wise valuation and cash flow data and other relevant information.
Coordinating with Benchmarking Agencies and assistance in resolving their queries.
Verification of Benchmarking processes and confirming the correctness thereof.
Co-ordination for data and information for customised performance report from Benchmarking Agency.
Disclosure of the performance versus benchmark report in PPM and other marketing material or reports to any investor.
Assist in getting the valuation from valuation agencies.

Question 6

What are the timelines for compliance with Benchmarking requirements?

Performance Benchmarking shall be done on a half yearly basis, based on the data as on September end (unaudited) and March end (audited).

AIFs have to provide data to Benchmarking Agencies within 45 days of the end of September HY and within 6 months from the end of March HY.

The Benchmarking has to be done since September 2019.