Summary:
The IFSCA has introduced a framework for Third-Party Fund Management Services (TFMS) at GIFT IFSC, enabling external fund managers to launch restricted schemes via registered FMEs without establishing a physical presence. While promoting ease of entry and operational flexibility, the model includes safeguards such as a USD 50 million fund cap, enhanced net worth requirements, and mandatory scheme-level governance. Rooted in global best practices, the framework balances innovation with regulatory accountability.
To transform GIFT IFSC into a competitive global fund management hub, the International Financial Services Centres Authority (IFSCA) has approved a framework allowing Third-Party Fund Management Services (“TFMS”). Announced vide the Authority’s 24th meeting on June 24, 2025, this “platform play” model permits External Fund Managers (“EFMs”) to launch and manage restricted schemes via registered Fund Management Entities (“FMEs”) in GIFT City, without any physical presence in the jurisdiction. While the framework is a significant step toward liberalisation, IFSCA has imposed specific limitations and safeguards that reflect a measured regulatory approach.
Stakeholders Benefit from the Framework
The TFMS framework draws some aspects from practices in global fund domiciles, such as Singapore, Luxembourg, and Mauritius, which have matured platform-based models. However, the IFSCA has chosen to limit the scope initially to balance regulatory control with market liberalisation.
Reducing Entry Barriers
The framework materially compresses time-to-market and minimises initial capital outlay by creating an option to explore the GIFT IFSC without establishing an entity, hiring employees, or incurring operational costs. This opens GIFT IFSC to a wider pool of asset managers, including first-time managers, family offices, and boutique funds.
Retaining Oversight Through FMEs
Unlike models that rely on licensing EFMs directly, the IFSCA retains centralised oversight by making the platform FME accountable. This approach is consistent with its regulatory philosophy of enhancing enforcement and supervision through a single-point accountability mechanism.
Caps as Risk Controls
The USD 50 million corpus cap may appear restrictive, but it’s rooted in risk containment. Since EFMs are not registered entities, imposing a size threshold allows the IFSCA to pilot the model without exposing the ecosystem to outsized risks.
Furthermore, the approach mirrors a sandbox-style regulatory framework, wherein the orientation is towards emerging fund managers, niche strategies, or proof-of-concept vehicles, rather than institutional-scale operations. It mitigates systemic risk in a model where control and accountability are delegated.
The Mechanics of Third-Party Fund Management Model
Under the TFMS model, an EFM is permitted to launch a restricted scheme through a registered FME that has obtained a specific TFMS registration from the IFSCA. The EFM is not required to register or maintain substance in the GIFT IFSC. Instead, it operates in a contractual arrangement with the FME, which remains accountable for compliance with the IFSCA (Fund Management) Regulations, 2025.
The FME acts as the fund’s regulatory face, managing filings, investor disclosures, governance, and reporting responsibilities. The EFM, meanwhile, is responsible for investment strategy and may engage in investor outreach and portfolio management, subject to the FME’s fiduciary oversight and compliance supervision, considering that it is the principal regulated entity.
Key Conditions and Regulatory Safeguards
The IFSCA has proposed to lay down a set of threshold conditions for FMEs to operate under the TFMS model:
- Net Worth Requirement: The FME must have a net-worth of at least USD 500,000 (over and above the existing net worth required for FME registration).
- Corpus Cap of USD 50 Million: Each scheme launched under the TFMS model can have a maximum corpus of USD 50 million.
- Dedicated Principal Officer: Every scheme managed under the TFMS must have a dedicated FME-appointed Principal Officer (PO). The PO is expected to possess the qualifications required under the FM Regulations and is responsible for day-to-day supervision and compliance with the respective scheme.
- Scheme-specific Governance Frameworks: The FME must ensure that each external scheme has robust internal risk management, audit, compliance, and grievance redressal mechanisms, in place. Such framework must be customised to the specific scheme.
- Disclosure Obligations: The PPM of the fund must explicitly disclose the involvement of a third-party manager, its role, the risk-sharing arrangement, and any potential conflicts of interest.
Conclusion
The TFMS framework is a structurally liberal, yet operationally guarded regulatory innovation. By allowing fund managers to plug into existing FME infrastructure, the IFSCA has lowered the entry threshold into GIFT IFSC while preserving the spirit of investor protection and regulatory accountability. The true test of the model’s success will lie in its uptake by credible fund managers, the responsiveness of FMEs, and the regulator’s ability to evolve the framework as trust in the model grows. For now, this marks a promising step in GIFT City’s evolution as a global fund management jurisdiction.
