Summary
- The SEBI (Alternative Investment Funds) Regulations 2012 impose a 25% cap on single-investee concentration for Category I and II AIFs, raising questions about compliance amid changing expense estimates.
- A fund's compliance can shift from compliant to non-compliant without additional investment due to revised expense projections impacting investable funds.
- SEBI's past rulings, including those involving India Realty and SREI, suggest a continuing obligation to meet the cap, but do not address scenarios where breaches arise solely from denominator changes.
- The article argues for a potential exception for passive breaches driven by expense revisions, advocating for a monitoring period instead of immediate divestment.
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