From Rs 0 to GIFT: How TPFM is lowering the entry barrier for fund managers

For years, entering a new financial centre as a fund manager meant building the infrastructure of a regulated fund-management business before the fund itself had proved its commercial potential. GIFT IFSC was no exception.

A manager seeking to establish an independent fund-management presence in GIFT IFSC traditionally had to create the appropriate legal and regulatory structure, build local substance, appoint key personnel and establish the operational infrastructure required to run a regulated fund. For smaller and emerging managers, these upfront commitments could make entering a new jurisdiction difficult to justify before meaningful assets had been raised.

Third-Party Fund Management Services (TPFM), introduced under the International Financial Services Centres Authority's (IFSCA) 2025 Fund Management Regulations, changes this equation.


Under the framework, an existing registered Fund Management Entity (FME) in GIFT IFSC can launch and manage eligible schemes on behalf of third-party fund managers. The model is increasingly described as a "platform play": the host FME provides the regulated infrastructure, while the third-party manager brings its investment strategy, expertise and fund proposition.

The significance of TPFM is therefore less about eliminating the cost of launching a fund and more about changing what a manager needs to build before entering GIFT IFSC.

The old problem: building before proving

The economics of entering a new jurisdiction have traditionally involved a mismatch between when costs are incurred and when revenues begin to materialise.

A fund manager may need to invest in establishing the appropriate regulatory structure, building local operations and substance, appointing key personnel, creating compliance and governance processes, establishing technology and reporting infrastructure, and putting in place the operational capabilities required to support investors and the fund.

These are largely platform-level costs. They arise because the manager is building the infrastructure needed to operate a regulated fund-management business, rather than because of the investment strategy itself.

For a large institutional manager, such costs may be relatively easy to absorb. For a boutique or emerging manager, however, they can become a significant barrier to entry.

The issue is not necessarily that the investment strategy lacks commercial potential. The manager may simply have to commit substantial resources to building a platform before knowing whether the strategy will attract sufficient assets.

TPFM: turning GIFT IFSC into a platform

The TPFM framework creates a different model of market entry.

Instead of a manager establishing every component of its fund-management infrastructure independently, an existing FME can provide the regulated platform through which the third-party manager's scheme is launched and managed.

The existing FME provides the regulated fund-management platform, regulatory and operational infrastructure, governance and oversight framework, compliance capabilities and fund-management processes. The third-party manager brings the investment strategy, fund proposition, investment expertise, investor and fundraising relationships and commercial strategy.

This does not mean that the third-party manager operates outside the regulatory framework. It allies with the host FME that remains subject to IFSCA requirements and carries responsibility for the regulated activities undertaken through the platform.

That distinction is important.

TPFM is not simply the "rental" of a regulatory licence. It is a model in which an existing regulated FME provides an institutional framework within which another eligible manager can deploy its investment strategy, subject to applicable regulatory, governance, risk-management and oversight requirements.

The result is a more modular approach to establishing a fund in GIFT IFSC.

The crucial distinction: fund capital vs. platform capital

This is where the economic significance of TPFM becomes clearest.

TPFM does not mean that a fund can be established with no capital requirements. The fund itself must still satisfy applicable regulatory requirements, including relevant minimum corpus requirements. For restricted schemes, the USD 3 million minimum corpus is particularly relevant to smaller managers.

But there is an important distinction between fund capital and platform capital.

Fund capital is the capital that must be raised for the investment vehicle itself. Platform capital refers to the resources required to establish and maintain the regulated fund-management infrastructure through which the vehicle is operated.

TPFM does not eliminate the first. It can significantly change the economics of the second.

A manager may therefore need to raise USD 3 million for its fund, but it does not necessarily need to commit the same scale of resources to building an independent fund-management operation in GIFT IFSC from the outset.

This is the real shift. The question is no longer simply whether the manager can afford to establish a fund-management platform in GIFT IFSC. It can increasingly become whether the manager can raise enough capital to make the fund commercially viable while accessing the platform infrastructure it needs.

In economic terms, TPFM can shift a portion of the manager's cost structure away from fixed platform-building expenditure towards access or usage-linked costs. That can change the point at which entering GIFT IFSC becomes commercially viable.

Why the USD 3 million threshold matters

The USD 3 million threshold is particularly relevant for boutique and emerging managers.

There is a segment of the market where a strategy may be capable of attracting several million dollars of capital but may not yet justify the expense of creating a standalone institutional fund-management operation.

TPFM creates a potential bridge for this segment

A manager can seek to raise capital for its strategy while accessing the regulatory and operational capabilities of an existing FME. This allows the manager to test its proposition, develop an investor base and establish a presence within the GIFT IFSC ecosystem without necessarily replicating the full infrastructure of a standalone FME on day one.

The significance is therefore not that the regulatory capital requirement disappears. It is that the scale of the fund and the scale of the platform no longer have to be identical.

Who benefits?

For boutique managers, TPFM can provide a route into GIFT IFSC without requiring a large infrastructure investment before achieving meaningful scale. A manager with a differentiated investment strategy can focus its resources on portfolio management, fundraising and investor relationships while relying on the host FME for much of the regulated platform infrastructure.

For emerging managers, the model can provide an opportunity to build an international track record and investor base before committing to a larger standalone presence. TPFM can therefore function as a bridge between launching a strategy and eventually establishing an independent institutional platform.

For overseas managers, the model can provide a potential route into the GIFT IFSC ecosystem without establishing an entirely separate fund-management entity and infrastructure at the outset. For managers considering India-linked strategies, Asia-focused products or international investment structures, this can lower the infrastructure commitment associated with entering a new financial centre.

The attraction is not simply lower cost. It is lower commitment before commercial validation.

What TPFM does and does not remove

It is important not to overstate what TPFM achieves.

TPFM does not eliminate the need for a viable investment strategy, investor capital, applicable minimum corpus requirements, regulatory and compliance obligations, governance and oversight, investor due diligence, risk-management requirements or the commercial cost of accessing the platform.

The host FME also retains significant regulatory responsibility. The third-party manager does not simply hand over its regulatory obligations and operate independently. The arrangement has to work within the governance, compliance and supervisory framework established by the FME and IFSCA.

The most accurate description of TPFM is therefore not "zero-cost fund management". It is a lower-infrastructure route into regulated fund management.

The "Rs 0" in the title should consequently be understood as shorthand for potentially minimal incremental platform-establishment expenditure, rather than zero capital or zero operating cost for the fund.

From building infrastructure to accessing infrastructure

As the TPFM market develops, competition is likely to move beyond the simple question of who has a presence in GIFT IFSC.

If multiple FMEs can offer third-party managers access to a regulated platform, managers will increasingly have to evaluate the quality of the infrastructure behind that platform. This could include fund administration, custody and clearing arrangements, regulatory reporting, compliance support, risk management, technology, investor servicing, operational efficiency, transparency of fees and the ability to scale as assets under management grow.

The competitive question may therefore shift from "Who can help me enter GIFT IFSC?" to "Which platform gives my fund the infrastructure to scale?"

The value proposition of an FME will increasingly depend not only on its regulatory status, but also on how efficiently it can convert that regulatory infrastructure into a practical operating platform for fund managers.

Conclusion

TPFM represents an important change in the economics of entering GIFT IFSC.

It does not make fund management free, remove regulatory requirements or eliminate the need for investor capital. What it does is separate two costs that previously tended to sit together: the capital required to launch the fund and the resources required to build the platform through which the fund is managed.

For boutique, emerging and overseas managers, that distinction can be significant.

Instead of building the entire infrastructure first and then seeking to prove that the fund can attract assets, a manager can potentially access an existing regulated platform and align its infrastructure costs more closely with the scale of the fund it is trying to build.

That changes the entry equation

The question for a manager considering GIFT IFSC may no longer be whether it can afford to build an institutional platform from day one. It may instead be whether it can build a sufficiently compelling strategy, raise the required capital and choose the right platform to support its growth.

TPFM therefore does more than lower a cost. It changes the sequence in which a fund manager can build its business: from building infrastructure first to accessing infrastructure first and building independently when scale justifies it.

(Mahesh Shekdar is Co-founder at Dovetail Group.)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)