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The National Infrastructure and Investment Fund (NIIF) is India’s first-ever sovereign wealth fund (SWF). The state-owned fund was set up by the Indian Government in the year 2015. The primary goal of setting up NIIF was to optimise the economic impact largely through investing in infrastructure-related projects.
A sovereign wealth fund is a state-owned fund. An SWF is used to invest in capital assets such as real estate, metals, stocks, and bonds. SWFs also invest in alternative investments such as private equity funds and hedge funds. Some SWFs invests in the global avenues. An SWF is mostly formed from the country’s reserves. The main objective of the SWFs is to allocate funds for the betterment of the country’s economy.
The Union Budget 2015-16 saw Arun Jaitley, the then Finance Minister, announcing the formulation of the NIIF, an alternative for providing long-term capital for the infra-related projects. The NIIF was allocated Rs 20,000 crore from the government. The Department of Economic Affairs gave the state-owned fund the nod in August 2015 and obtained registration under the Indian market regulator the Securities and Exchange Board of India (SEBI) in December 2015 under Category II Alternative Investment Fund. As per the latest available data, the NIIF currently manages funds of worth more than USD 3.4 billion.
The NIIF invests with a long-term horizon. The following objective guides the investment philosophy of the NIIF:
Currently, the NIIF is managing the Master Fund, Fund of Funds, and Strategic Fund. NIIF funds were found to primarily invest in the infra-related projects across the country by building the capital from both domestic and international investors.
The NIIF signed the first investment deal of worth USD 1 billion with the Abu Dhabi Investment Authority (ADIA) in October 2017. The ADIA became the first-ever international investor in the NIIF’s master fund. The Indian Government holds a 49% share in the NIIF. Domestic investors such as ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Life are the other notable investors in the NIIF. The Asian Infrastructure Investment Bank in June 2018 announced to invest USD 200 million. They invested USD 100 million in June 2018 and said they would invest another USD 100 million on a later date.
The master fund, along with DP World invested in the logistics and ports sector in February 2018. The NIIF in association with DP World proclaimed investments of worth USD 3 billion. Hindustan Infralog, the joint venture of NIIF and DP World purchased a 90% stake in the Continental Warehousing. The UK Government in association with the NIIF started the Green Growth Equity Fund (GGEF) under its Fund of Funds to invest in transportation, water, waste management, renewable energy, and other similar sectors in the country.