Building an Internal SOP Manual for a First-Time AIF Manager
Most first-time AIF Managers carry their entire operating process in the heads of two or three founding team members. That works fine until it doesn't — and an SOP manual is how a Manager entity turns institutional knowledge into something that survives team turnover, growth, and SEBI inspection.
Why This Matters More for a First-Time Manager, Not Less
There's a common assumption that SOP documentation is a "scale-up" problem, relevant once a Manager has grown large enough to need formal process. In practice, the opposite is true — a first-time Manager building SOPs from day one embeds discipline into the organisation's DNA before bad habits and undocumented workarounds accumulate, while a Manager waiting until it feels "big enough" typically has to unwind years of ad hoc practice first, a considerably harder retrofit.
What the Manual Needs to Cover — Investment Process
At minimum, the manual should document: the deal sourcing and screening process through to Investment Committee presentation, the due diligence checklist applied consistently across every prospective investment, the Investment Committee's decision-making protocol including quorum and conflict-of-interest recusal procedures (relevant to the related-party transaction documentation covered in our companion piece), and the post-investment monitoring cadence for portfolio companies.
What the Manual Needs to Cover — Compliance and Regulatory Processes
This is the section SEBI inspection teams will look for evidence of being genuinely followed, not just documented: the process for tracking and meeting AIF regulatory filing deadlines, the escalation protocol when a compliance question arises that the Compliance Officer isn't certain about, the whistleblower policy's operational workflow (covered in our companion piece), and the process for updating Key Management Personnel and fit-and-proper declarations when the Manager entity's team changes.
What the Manual Needs to Cover — Investor Relations and Reporting
Document the standard quarterly/periodic reporting production process end to end — who prepares which section, who reviews it, and the sign-off chain before it goes to investors — along with the protocol for handling investor queries and complaints, and the specific process for any investor consent or approval requirement under the PPM (capital call extensions, key man event notifications, related-party transaction approvals).
What the Manual Needs to Cover — Operational and Financial Controls
Document the capital call and distribution processing workflow, the expense allocation policy (which costs are borne by the fund versus the Manager entity, a frequent source of investor scrutiny), the vendor and service-provider onboarding process (including due diligence on custodians, administrators, and auditors), and the data security and access control protocol for investor information.
Making the Manual a Living Document, Not a Shelf Item
An SOP manual that's written once at fund launch and never revisited quickly becomes disconnected from how the team actually operates — and a manual that doesn't reflect actual practice is worse than no manual at all if it's ever produced during a SEBI inspection and the inspector finds the real process diverges from what's documented. Build a defined review cadence (annual, at minimum, or triggered by any material process change) into the manual's own governance, with a named owner responsible for keeping it current.
Where This Intersects With Regulatory Expectations
SEBI's increasing emphasis on governance and internal controls for AIF Managers — visible across recent circulars on related-party transactions, AI tool governance, and investor consent mechanisms — means a documented, genuinely-followed SOP framework is becoming less of a best-practice nicety and more of an implicit expectation a Manager needs to be able to demonstrate on inspection.
Building This Framework From the Start
An SOP manual built properly at fund launch is one of the highest-leverage governance investments a first-time Manager can make — cheap to build early, expensive to retrofit later, and directly useful the first time a SEBI inspection or an institutional LP's due diligence team asks to see it. We help first-time Managers build this documentation as part of fund formation, not as an afterthought once the fund is already operating.
This article is for general informational purposes and does not constitute regulatory or governance advice specific to any fund manager's circumstances.
CA Anuj Desai