Artha Bharat Investment Managers plans to restructure its investment models by moving two funds managing over $125 million to Abu Dhabi. This decision aims to simplify investment avenues for both resident and non-resident Indians while addressing the challenges posed by the current International Financial Services Centre (IFSC) framework in GIFT City.
Overview of Fund Restructuring
The two funds targeted for relocation are the Artha Global Multiplier Fund and the Artha Bharat Absolute Returns Fund, managing approximately $100 million and $25 million respectively. Sachin Sawrikar, managing partner at Artha Bharat, emphasized the difficulty of accommodating different investor types under the existing fund structure. Under the current IFSC framework, pooling resident and non-resident investors in a single fund has been challenging. Addressing the disparity, the minimum investment required in Abu Dhabi is $50,000, significantly lower than the $150,000 in GIFT City.
Operational and Financial Challenges
According to Sawrikar, the Absolute Returns Fund has struggled to attract external investors since its launch 15 months ago, a situation exacerbated by the inability to combine resident and non-resident investors. Furthermore, operational hurdles such as managing payments to overseas service providers create friction in GIFT City. This friction arises from the administrative burden associated with tax assessments on cross-border payments, which complicates the investment landscape for prospective investors.
“Investors are increasingly seeking jurisdictions that facilitate fast onboarding and clear tax implications. While GIFT City offers competitive costs for premises and staff, the back-end operations related to cross-border services can deter investment,” remarked Sawrikar.
Future Fund Launches in Abu Dhabi
Artha Bharat plans to launch new funds in the Abu Dhabi Global Market (ADGM) by the first quarter of 2027. They intend to facilitate the transition for existing non-resident investors into these new funds. Following this, the existing funds in GIFT City will be converted into feeder funds that channel investments into the new Abu Dhabi funds for resident Indian investors. This two-tier structure aims to retain strategic flexibility while expanding investor access.
“Once operational, non-resident and international investors will have direct access to the Abu Dhabi funds, while resident Indians can invest through our GIFT City feeder funds,” Sawrikar explained, outlining the dual approach to investor engagement.
What This Means
The shift in Artha Bharat’s strategy to relocate its funds can have significant repercussions for Indian investors and the broader financial market landscape. By transitioning to a more globally favorable jurisdiction like Abu Dhabi, the firm aims to tap into a wider pool of investment capital, which could lead to better-managed funds and potentially higher returns. Given the current investment climate and regulatory environment in India, this move reflects a growing trend among financial institutions seeking to streamline operations and enhance investor access across borders.
Furthermore, this transition signals an increasing recognition of the challenges faced in GIFT City, prompting a reevaluation of investment structures. If successful, it could encourage other funds to consider similar approaches, promoting a more diverse and competitive investment ecosystem that benefits both resident and non-resident investors.
Frequently Asked Questions
What are the benefits of moving funds to Abu Dhabi?
The move to Abu Dhabi allows for lower investment thresholds, simplified compliance, and an environment with zero withholding tax on overseas service payments, making it attractive for both resident and non-resident Indian investors.
How will existing investors be impacted by the restructuring?
Existing non-resident investors will be transitioned to new funds in Abu Dhabi, while resident Indian investors will access opportunities through newly created feeder funds linked to the Abu Dhabi funds once the restructuring is complete.
Why is the GIFT City framework problematic?
The GIFT City framework currently poses challenges with high minimum investment thresholds and operational complications in accommodating both resident and non-resident investors in the same fund structure, limiting investment potential.
When are the new funds in Abu Dhabi expected to launch?
The anticipated launch of the new funds in Abu Dhabi is scheduled for the first quarter of 2027, with existing funds in GIFT City expected to transition following this launch.
