Brief Overview:
Alternative Investment Funds (“AIFs”) are now permitted to enter into Credit Default Swaps (“CDS”) transactions by their regulator, The Securities and Exchange Board of India.
Technical Details:
1) Permissibility:
* underlying investment in debt securities + only for purposes of hedging
** for purposes of hedging or otherwise within allowed leverage
*** by earmarking unencumbered Government Bonds/Treasury Bills equivalent to CDS exposure
2) Reporting: To be done to the custodian by the next working day.
3) Prior intimation to the unitholders: Any unhedged position, which shall result in gross unhedged positions across all CDS transactions exceeding 25% of investable funds of the scheme of an AIF to be taken only after intimating to all unit holders of the scheme.
4) Compliance: With the Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2022, dated 10th February 2022 and other circulars notified in this aspect.
For further details, please see:
For any queries / clarifications, please feel free to ping us and we will be happy to chat:
Ms. Smrithi Nair (smrithi.nair@jclex.com)
Ms. Mahak Saboo (mahak.saboo@jclex.com)
