Important for
Prelims: Indian Economy
Mains: General Studies III
What is in the News ?
- The Securities and Exchange Board of India (SEBI) is deliberating on allowing permanent capital vehicles (PCVs), evergreen or perpetual funds, where the capital available is managed for an unlimited period of time, into India.
- These funds can potentially exist for perpetuity and are aimed at long-term investors such as pension funds and insurance firms which do not want return of capital but regular income.
- The funds could be structured in a way to give investors an option to redeem a certain portion of their investment after a 5, 10 or 15-year lock-in. PCVs can thus be considered as an alternative to PE funds with limited life cycles.
What are PCVs ?
- Unlike traditional funds which have a finite tenure, perpetual funds don’t have a maturity date.
- These funds are aimed at long-term investors such as pension funds and insurance firms which do not want the return of capital but regular income.
- PCVs can be of various types, including limited partnerships traded publicly on an exchange, real estate investment trusts, closed-ended funds, interval funds and variable funds such as annuities and life insurance.
Practice Questions for Prelims
Consider the following statements regarding Permanent Capital Vehicles (PCVs) :
1. These funds have very long tenures and maturity date.
2. These funds are ideal for long-term investors like Insurance and Pension investors.
3. Another name for these funds is Evergreen Funds.
Which of the above statements is/are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1,2 and 3
Ans. b)
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