Rules on infrastructure funds… the permissible investments

The Securities and Exchange Commission (SEC) Tuesday released the rules on Infrastructure Funds. Infrastructure Fund is a specialised Fund or Scheme that invests primarily (minimum 90% of scheme’s net assets) in securities or securitised debt instrument.

The securities or securitised debt instruments are that of: infrastructure companies; infrastructure capital companies; infrastructure projects; special purpose vehicles (SPVs), which are created for the purpose of facilitating or promoting investment in infrastructure, and other permissible assets including revenue generating projects of infrastructure companies or projects or special purpose vehicles.

The approved rule requires that an Infrastructure Fund invest at least 90 percent of its assets in the securities or securitised debt instruments of infrastructure companies or projects or special purpose vehicles, which are created for the purpose of facilitating or promoting investment in infrastructure in respect of revenue generating projects of infrastructure companies or special purpose vehicle.

Also, the new rule says Infrastructure Fund may invest in equities, convertibles including mezzanine financing instruments of companies engaged in infrastructure, infrastructure development projects, whether or not listed on a recognised stock exchange in Nigeria; or money market instruments, structured loans and bank deposits for liquidity purposes to cover costs and/or other expenses associated with the Fund operations.

Also, the rule allows the investment restrictions to be applicable throughout the life-cycle of the Infrastructure Fund and be reckoned with reference to the total amount raised by the Fund.

The rule also allows an Infrastructure Fund to invest up to 70% of its net assets in the securities or assets of any single infrastructure company or project or special purpose vehicle, which is created for the purpose of facilitating or promoting investment in infrastructure in respect of revenue generating projects of any single infrastructure company or project or special purpose vehicle.

It also notes that an Infrastructure Fund shall not invest more than 30 percent of its net assets in debt instruments of any single infrastructure company or project or special purpose vehicles, which is created for the purpose of facilitating or promoting investment in infrastructure in respect of completed and revenue generating projects of any single infrastructure company or project or special purpose vehicle, which is rated below investment grade or unrated, provided that such investment limit may with good cause, be extended up to 50 percent of the net assets of the scheme, with the prior approval of the Trustees, the Fund’s Investment Committee and the board of the Fund Manager as applicable.

Iheanyi Nwachukwu