Due to this growth, AIFs have been making consistent efforts to establish a robust governance framework that involves ongoing monitoring and evaluation of the fund’s operations, performance, and compliance with regulatory requirements. Some of the challenges are faced in key support functions like investor onboarding, end-to-end fund accounting and fund operations, regulatory and investor reporting, etc., particularly for those funds with outdated technology and manual processes.
Further, these challenges may result in inadvertent errors in computation of NAV and key ratios of the fund’s performance to external investors. This may, in turn, result in loss of investors and other stakeholders’ confidence in the fund.
The regulatory framework for AIFs is also extremely complex and ever-changing, making it difficult to comply, especially when rules and regulations are frequently updated. Failure to track regulatory changes may result in penalties by the SEBI.