Category III AIFs may invest in commodity derivatives

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The Securities and Exchange Board of India through Circular No. 61 dated 21 June allowed for the participation of category III alternative investment funds (AIFs) in the commodity derivatives market subject to the following conditions: (1) category III AIFs can invest not more than 10% of their investable funds in one underlying commodity; (2) category III AIFs may leverage or borrow subject to consent from the investors in the fund and subject to a maximum limit, as specified by SEBI from time to time; (3) category III AIFs are required to make disclosures in the private placement memorandum issued to investors about their potential investment in commodity derivatives.