Understanding the Impact of the IFSCA Fund Management Amendments on Third-Party Fund Management
- GIFT CFO
- 5 days ago
- 3 min read
📖 Introduction – Why This Matters Now
On 24th July 2025, the International Financial Services Centres Authority (IFSCA) announced a landmark amendment to its Fund Management Regulations, 2025, introducing Third-Party Fund Management Services in GIFT City, Gandhinagar.
This move is set to transform GIFT City into a global fund servicing hub, enabling international fund managers to operate seamlessly in India’s only IFSC without the cost, time, and compliance hurdles of setting up their own separate regulated entity.
In essence, this is “Platform Play” for fund management — an IFSC-based Fund Management Entity (FME) can now host and run schemes on behalf of other regulated fund managers.
🔍 What Is Third-Party Fund Management?
In simple terms:
A Third-Party Fund Management Arrangement is when a Registered FME in GIFT City manages investment schemes for another regulated fund manager (the “third party”).
The third party could be a fund house, asset manager, portfolio manager, or investment adviser regulated in its own country.
Think of it like leasing your regulatory infrastructure — the IFSC FME provides the licence, compliance, and operational setup; the third party brings its products, expertise, and investors.
💡 Who Benefits From This?
1. International Fund Managers
Get instant access to the Indian IFSC ecosystem without setting up a new regulated entity.
Operate under a clear, trusted regulatory umbrella.
2. IFSC-based FMEs
Monetise their licence and infrastructure by servicing multiple global managers.
Diversify their business model beyond self-managed schemes.
3. Investors
Access a broader set of global products under one regulated marketplace.
⚖ Key Regulatory Highlights
IFSCA’s framework comes with a strong compliance backbone to protect investors and ensure accountability.
1. Authorisation Is Mandatory
FMEs must apply to IFSCA for approval before offering third-party services.
This is in addition to their existing FME licence.
2. Net Worth Requirements
USD 500,000 additional net worth requirement (over existing FME requirements).
Ensures financial stability of service providers.
3. Scheme Limits
Only Restricted Schemes allowed, capped at USD 50 million corpus per scheme (unless otherwise specified by IFSCA).
4. Eligibility of Third Party
Must be a regulated entity in India, IFSC, or a foreign jurisdiction.
Must have adequate resources, experienced personnel, and meet “fit and proper” criteria.
5. Governance & Key Personnel
Each scheme must have a dedicated Principal Officer.
Separate compliance officers for Retail vs Non-Retail schemes.
Additional KMP requirements based on AUM thresholds.
6. Risk Management
Segregation of funds between schemes.
Independent operational control for each scheme.
Periodic internal audits and investor grievance mechanisms extended to third-party schemes.
7. Investor Disclosures
FMEs must clearly disclose:
Details of the third party and key persons.
Responsibilities of each party.
Potential conflicts of interest.
Measures to mitigate risks.
🚀 Strategic Opportunities
For IFSC-based FMEs:
Build a platform revenue stream servicing multiple managers globally.
Leverage GIFT City’s tax and regulatory benefits to attract clients.
For Global Managers:
Faster market entry with lower compliance burden.
Test Indian investor appetite without committing large setup costs.
For the IFSC Ecosystem:
Increase in Assets Under Management (AUM).
Global branding as a cross-border fund management hub.
📅 Compliance Timeline & Action Points
Apply for IFSCA authorisation before onboarding any third-party schemes.
Ensure the USD 500k additional net worth is maintained.
Update governance documents (MOA for companies / LLP agreements).
Implement risk management and disclosure frameworks.
💬 Conclusion
IFSCA’s Third-Party Fund Management Services framework is a strategic leap forward in making GIFT City a competitive alternative to Singapore, Dubai, and Luxembourg for fund domiciliation and servicing.
By allowing global managers to plug into IFSC-licensed FMEs, India is positioning itself as a gateway between global capital and Indian expertise — and early movers will have the biggest advantage.
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