Consider the following statements regarding the Corporate Debt Market Development Fund (CDMDF): 1. It will be established as an Alternative Investment Fund. 2. Contribution to the fund shall be mandatory for specified debt-oriented Mutual Fund Schemes and Asset Management Companies 3. Initially, it will be established for 5 years and can be extended as per SEBI’s mandate. How many of the statements given above are correct?

Official answer key: B. The answer shown above (C) is the academy’s own.

• The Corporate Debt Market Development Fund (CDMDF) is a specialized fund established to enhance the development of the corporate debt market by providing liquidity and improving the market infrastructure.
• The CDMDF is typically structured as an AIF, which is a category of investment funds regulated by financial authorities. It focuses on alternative assets and strategies beyond traditional investments. Hence, statement 1 is correct.
• Types of AIFs: It may be classified under various categories of AIFs, such as private equity funds, venture capital funds, or hedge funds, depending on the specific investment strategy and regulatory framework.
• CDMDF serves as a backstop facility for investment-grade corporate debt securities, providing stability and enhancing investor confidence in the market.
• CDMDF provides a backstop facility of Rs 33,000 crore has been established for Mutual Funds. The government will contribute Rs 30,000 crore, and the Asset Management Companies will provide the remaining Rs 3,000 crore.

Who Must Contribute

• Debt-Oriented Mutual Fund Schemes: Mutual fund schemes that primarily invest in debt securities are required to make contributions. These schemes include fixed income funds, income funds, and other debt-focused products
• Asset Management Companies (AMCs): AMCs managing these debt-oriented mutual fund schemes are also required to contribute. This ensures that the entities benefiting from the corporate debt market also contribute to its development.
• Hence, statement 2 is correct.
• Contribution Mechanism: Fixed Percentage or Periodic Payments
• The CDMDF is initially set up for a period of 5 years. This initial duration allows the fund to implement its strategies, provide liquidity support, and contribute to the development of the corporate debt market.
• The fund's duration can be extended beyond the initial 5 years based on the mandate from SEBI, the regulatory authority overseeing the fund. Hence, statement 3 is correct.