Alerts & Updates 12th Mar 2024

IFSCA’s Exemptions for Sovereign Wealth Funds


Vinod Joseph Partner | Mumbai
Paridhi Jain Associate | Mumbai

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  • The IFSCA has issued a circular dated March 11, 2024 (IFSCA March Circular) setting out two relaxations/exemptions for Sovereign Wealth Funds that have established alternative investment funds  in an IFSC. The two exemptions are:

    • Regulation 132 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 (FM Regulations) provides that the Fund Management Entity (FME) shall appoint an independent custodian to carry out the custodial services at least for the following schemes: – (1) Retail schemes (2) Open ended restricted schemes and (3) All other schemes managing AUM above USD 70 million.

    For Sovereign Wealth Funds: The IFSCA March Circular states that open-ended Restricted Schemes and all other schemes with AUM above USD 70 million set up by a Sovereign Wealth Fund however need not appoint an independent custodian as required by Regulations 132(2) and 132(3) of the FM Regulations.

    • Regulation 10(2) of the FM Regulations requires the FME to have an office in IFSC that is dedicated, secured and accessible only by authorized person(s) of the FME.

    For Sovereign Wealth Funds: The IFSCA March Circular allows FMEs set up by Sovereign Wealth Funds to share their office space with the trustee of scheme(s) managed by the FME provided the trustees services are not offered to any third-party.

  • ELP Comments
    • Regulation 132 of the FM Regulations uses the term ‘independent custodian’ and so does the March Circular. It may be presumed that Sovereign Wealth Funds that are set up in Gift City need not appoint any custodian, independent or otherwise.
    • The impact of Regulation 10(2) of the FM Regulations has been that if an AIF regulated by IFSCA is in the form of a trust, it would require two offices in GIFT City, one for the FME and the other for the scheme. The March Circular allows Sovereign Wealth Funds to set up an AIF in GIFT City with a single office that can be used by both the FME and the scheme. However, the trustee of the scheme cannot render services to any third party.
    • The second exemption offered by the IFSCA March Circular has a twist at the end. The exact language of this exemption is as follows:

    “b. The requirement of having the office space of the FME to be dedicated, secured and accessible only by authorised person(s) of the FME [subregulation (2) of regulation 10 of the Regulations] is relaxed to the extent that Page 2 of 2 the FME and trustee of Scheme(s) set up in the form of trust, may occupy the same office space if their services are not offered to any third-party.”

    It is very likely that the trustee of the Sovereign Wealth Fund schemes, if it is a professional trustee company, would be the trustee of various other schemes of other AIFs. In such a scenario, would the exemption offered by the IFSCA March Circular apply? In our view, the IFSCA merely intends that the shared office space should not be used to offer services to third parties. There is no restriction per se on the trustee (of the Sovereign Wealth Fund’s schemes) acting as the trustee to schemes of other AIFs. So, if a Sovereign Wealth Fund has an FME and three schemes in GIFT City, both the FME and the trustee of the three schemes can use the same office space. However, the trustee (of the three schemes) cannot use that office space to render services to third party schemes.

    We hope you have found this information useful. For any queries/clarifications please write to us at  or write to our authors:

    Vinod Joseph, Partner – Email –
    Paridhi Jain, Associate, Email –

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.