The three scheme types at a glance
| Venture capital scheme | Restricted scheme | Retail scheme | |
|---|---|---|---|
| Who may launch | Any FME category | Registered FMEs | Registered FME (Retail) |
| Investors | Accredited investors, or at least USD 250,000 each; no more than 50 | Accredited investors, or at least USD 150,000 each; no more than 1,000 | All investors or a section of them; at least 20, none above 25% |
| Minimum corpus | USD 3 million (maximum USD 200 million) | USD 3 million | USD 3 million |
| Open or closed | Close-ended only; tenure at least three years | Category III may be open-ended; others close-ended | Either; close-ended tenure at least three years |
| Document and filing | Placement memorandum; open for subscription once taken on record | Placement memorandum; open for subscription once taken on record | Draft offer document filed at least 21 working days before launch |
| Legal form | Company, LLP or trust | Company, LLP or trust | Company or trust |
Lower minimums apply to employees and directors of the FME, and close relatives may invest jointly to reach the threshold. For tax and exchange control purposes, a venture capital scheme is construed as a Category I Alternative Investment Fund, and a restricted scheme is filed as a Category I, II or III AIF depending on its strategy (regulations 18 and 30).
Venture capital and restricted schemes
- Venture capital schemes invest primarily in unlisted securities of start-ups and early-stage ventures, and must place at least 80% of the corpus in companies no more than ten years old. Since 10 September 2026 they may follow on in later rounds of such companies after ten years, without increasing their fully diluted stake.
- Restricted schemes cover venture, SME, infrastructure, ESG and special situation strategies (Category I), complex trading strategies including derivatives (Category III) and everything else, such as private equity and credit (Category II). A close-ended restricted scheme may put up to 20% of its corpus into physical assets such as real estate, bullion or art. An open-ended scheme may hold no more than 25% in unlisted securities, and only once it has reached USD 3 million.
- Open-ended start. An open-ended restricted scheme may begin investing at USD 1 million and must reach USD 3 million within 12 months.
- Placement memorandum validity. First close must be declared within 12 months. The FME may extend validity in six-month steps while the memorandum is still valid, paying 25% of the fresh filing fee for the first extension and 50% for each later one.
- Skin in the game. The FME or its associate contributes at least 2.5% of the corpus or USD 750,000, whichever is lower (5% or USD 1.5 million for open-ended restricted schemes), usually capped at 10%. Relocated schemes are exempt, and investors may waive it in defined cases.
- Disclosure. NAV is reported at least yearly for venture capital schemes, and monthly (open-ended) or half-yearly (close-ended) for restricted schemes. Portfolios are disclosed yearly or quarterly respectively.
Retail schemes and ETFs
Retail schemes are the mutual fund equivalent and only a Registered FME (Retail) may launch them or exchange traded funds. The main protections are:
- no more than 10% of AUM in one company (15% with the fiduciaries' approval), and no more than 25% in one sector (50% for financial services), with exceptions for sectoral, thematic and index schemes;
- no more than 15% in unlisted securities for an open-ended scheme;
- borrowing only for temporary redemption needs, capped at 20% of AUM for six months;
- daily NAV for open-ended schemes and weekly NAV for close-ended schemes;
- an FME contribution of 1% of AUM or USD 200,000, whichever is lower; and
- an independent custodian in every case (regulation 132).
What changed in 2026
- Second Amendment Regulations (in force 10 September 2026). Money received before first close must be kept in capital-preserving, liquid investments such as bank deposits and overnight funds. NAV and portfolio disclosure now run from the date investment activity starts. FME contributions are calculated on actual corpus rather than target corpus, and index schemes in the restricted and retail categories are exempt from them.
- Differential distribution (circular of 25 September 2026). Venture capital and restricted schemes may issue one class of senior units and one or more classes of junior or subordinate units. Junior holders may absorb first losses, accept lower or zero returns, or make grants to ESG schemes (grants capped at 49% of corpus). The minimum investment in junior units is USD 2 million, or USD 1 million for certain accredited investors. The placement memorandum must show the waterfall in worked examples.
- Proposal: secondary listing of ETFs. IFSCA issued a consultation paper on the secondary listing of ETFs in the IFSC in August 2026. It is a proposal, not yet a rule.
Special situation funds, a category of restricted scheme for stressed assets, and investment trusts have their own parts of the Regulations and are not covered here.