Who it is for
A family investment fund pools money only from a single family. The Regulations define that as the lineal descendants of a common ancestor, with their spouses (including widows and widowers) and children (including stepchildren, adopted children and children born outside marriage). It also includes companies, LLPs, trusts, partnership firms and other entities in which the family exercises control and holds a substantial economic interest. IFSCA's circular of 1 March 2023 sets that interest at 90% or more.
The fund may not take money from outside the family. The one exception is that employees, directors, the FME and other service providers may be given an economic interest under an internal reward policy, capped at 20% of the fund's profits in aggregate. Before the fund starts investing, every contributing family member gives the principal officer an undertaking acknowledging that the usual investor protections do not apply to the same extent.
How it is set up
- The manager. The family sets up its own Authorised FME to manage the fund (regulation 3(4)(a)(ii)); IFSCA describes the fund as self-managed. Families that want an outside professional manager usually use a portfolio management mandate or a multi-family office instead. See portfolio management.
- The vehicle. A company, an LLP or a contributory trust (regulation 104(1)). A trust qualifies only if its beneficiaries are identifiable from the deed and each beneficiary's share can be determined without the trustee's discretion. A purely discretionary trust does not.
- No net worth test. The FME legal form and net worth rules do not apply to a family investment fund (regulation 104(2)).
- Corpus. At least USD 10 million, reached within three years of registration and then maintained. Additional investment vehicles may be set up by filing with IFSCA and count towards the corpus.
- Substance. The principal officer must be based out of the IFSC and meet the regulation 7 qualifications, and the office must be dedicated and secured.
- Classification. The fund or each vehicle is construed as a Category I, II or III AIF according to its strategy.
The application is made on SWIT. See IFSCA registration.
Money in and investments out
- Non-resident members (including NRIs and OCIs) contribute in foreign currency. An IFSC financial institution is treated as a person resident outside India under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, so their money does not pass through the rupee routes.
- Resident members contribute by outward remittance, individuals within the Liberalised Remittance Scheme and entities under the overseas investment rules. Whether a family-controlled contribution is portfolio or direct investment, and the filings that follow, is the point on which resident families have most often been held up. Confirm the current RBI and IFSCA position before funding. See residents and the LRS.
- Investments. Listed and unlisted securities, debt and money market instruments, units of other funds, derivatives, LLP interests and physical assets such as real estate, bullion and art, in the IFSC, India or abroad (regulation 106). Investment into India follows the route that applies to the instrument, for example the foreign portfolio investor route for listed Indian securities.
- Leverage is permitted within the fund's risk management policy (regulation 107).
Design questions for the family
- Governance. Who sits on the board or acts as trustee or designated partner, who decides investments, and how the next generation joins. A family charter and an investment policy statement are the usual starting documents.
- Succession. The fund's constitution must work with wills, family trusts and family arrangements. A determinate trust or company shares make succession to interests in the fund traceable.
- Tax. Look at three levels separately: the fund or FME, income within the fund, and distributions or exits for each member according to their residence. See the section 147 deduction and tax for non-resident investors.
- Exit for outsiders. Where non-family persons hold permitted interests in a family entity, they must be told the risks and may be offered an exit at an independently determined price.
For a full treatment, see our Publication Series Vol. III, Family Offices at GIFT IFSC (first edition, May 2026), on the booklets page, and our private client practice.