The International Financial Services Centres Authority (IFSCA) has issued a new circular dated September 25, 2026, introducing a framework that enables multiple classes of units with differential distribution rights in Venture Capital Schemes and Restricted Schemes.
The framework is designed to facilitate blended finance and other fund structures, allowing investors with different risk and return preferences to participate in the same scheme.
🔹 What can Fund Managers now structure?
Eligible schemes can issue:
• Senior units
• Junior units
• Subordinate units
Senior units cannot differ in terms of risk, priority of returns or loss absorption, although they may differ in fees, currency and other operational aspects.
Junior or subordinate investors may, subject to the framework:
➡️ Bear portfolio losses beyond their pro-rata share
➡️ Accept lower financial returns
➡️ Accept zero financial returns
➡️ In certain ESG structures, provide grants to the scheme.
🌱 Blended Finance & ESG
The framework specifically provides for grants to ESG Schemes, with aggregate grants capped at 49% of the scheme corpus.
Grants can be linked to a separate class of “social units” or accepted without issuance of such units, subject to appropriate disclosure in the PPM.
Importantly, grants must be separately accounted for in the scheme’s audited annual financial statements, and the FME must maintain a written policy covering their acceptance, administration and deployment.
💰 Minimum investment
For junior/subordinate units:
USD 2 million — standard minimum investment
USD 1 million — for accredited investors
No minimum investment — for grants.
📄 PPM disclosures become critical
The PPM must prominently disclose:
• Rights attached to each class of units
• Distribution waterfalls
• Redemption and winding-up distributions
• Scenarios involving loss of capital
• Additional risks associated with each class
• Applicable conversion milestones and triggers.
What this means for IFSC Fund Managers
The framework creates a regulatory structure for designing funds where different investors can take different levels of risk and return within the same scheme.
For blended finance structures, this can allow concessional/philanthropic capital to absorb greater risk while commercial investors participate through a different class of units.
Effective immediately.
📌 Source: IFSCA Circular — September 25, 2026