Introduction
Over the last few years, Alternative Investment Funds (AIFs) have seen a noticeable increase in regulatory, trustee, and investor scrutiny around IT and cybersecurity. Most fund sponsors are now familiar with high-level guidance: policies must exist, risks must be identified, controls must be documented, and incidents must be reported responsibly. Advisory firms, consultants, and auditors have played an important role in helping AIFs understand what SEBI expects.
However, a growing number of AIFs are discovering a hard truth: advisory alone does not translate into compliance.
Policies remain unimplemented. Risk registers are not updated. Patch cycles drift. Evidence is missing when inspections occur. Trustees receive assurances without operational backing. The gap is not knowledge—it is execution.
This is where MSP-led compliance has emerged as a far more effective model for AIFs. Instead of separating advice from operations, Managed Service Providers trends integrate governance requirements directly into daily IT execution. The result is compliance that is continuous, provable, and defensible, without forcing funds to build large internal IT teams.
This article explains why MSP-led compliance works better than advisory-only approaches for AIFs, how it aligns with SEBI’s fiduciary expectations, and why execution—not intent—is now the decisive factor under regulatory scrutiny.
The Advisory Model: Strong on Guidance, Weak on Outcomes
Traditional advisory-led compliance typically focuses on:
- Gap assessments
- Policy drafting
- Control frameworks
- One-time audits or certifications
These are valuable inputs. But they are static by nature.
In many AIFs, advisory outcomes look like:
- Well-written IT and cybersecurity policies
- Detailed risk registers
- Compliance roadmaps
Yet, six months later:
- Patch SLAs are missed
- Access reviews are overdue
- Vendor risks are unmanaged
- Evidence is incomplete
SEBI inspections and trustee reviews do not evaluate documents in isolation. They assess whether controls are operating consistently over time.
Why AIFs Struggle to Execute Advisory Recommendations
SEBI cybersecurity guidelines for AIFs are structurally lean organisations. Execution gaps typically arise because:
- There is no dedicated internal IT or security team
- Operations teams juggle multiple responsibilities
- Advisory recommendations lack operational ownership
- Controls are not embedded into daily workflows
Advisory firms often assume that execution will happen internally. In practice, execution is nobody’s full-time responsibility.
SEBI’s Shift: From Frameworks to Evidence
The Securities and Exchange Board of India has steadily shifted its focus from:
- “Do you have policies?”
to
- “Can you show us how controls operate?”
SEBI inspections increasingly examine:
- Patch and vulnerability reports
- Access review records
- Incident logs and timelines
- Vendor oversight evidence
- Governance review minutes
This shift exposes the limitations of advisory-only models.
The Core Difference: Advisory Explains, MSP Executes
At a fundamental level:
- Advisory tells you what should be done
- MSPs ensure it actually happens
MSP-led compliance embeds regulatory expectations directly into:
- Endpoint management
- Patch deployment
- Identity and access control
- Monitoring and reporting
- Incident response
Compliance becomes a by-product of daily operations, not a separate exercise.
Execution Is What Trustees and Inspectors Trust
Trustees and inspectors rarely challenge advisory intent. They challenge execution.
Typical questions include:
- When were systems last patched?
- Who reviewed user access last quarter?
- How was the last security alert handled?
- Where is the evidence?
MSP-led models answer these questions with operational records, not narratives.
MSP-Led Compliance: A Practical Definition
MSP-led compliance means:
- Controls are implemented, monitored, and maintained by the MSP
- Governance and oversight remain with the fund sponsor
- Evidence is generated automatically as part of service delivery
- Compliance is continuous, not episodic
This aligns naturally with how AIFs operate.
Why MSP-Led Compliance Fits AIF Operating Models
AIFs benefit from MSP-led compliance because it:
- Avoids building internal IT teams
- Converts fixed advisory cost into ongoing value
- Scales with fund growth
- Reduces dependency on individuals
Most importantly, it aligns compliance with actual risk exposure, not theoretical frameworks.
Patch Management: A Clear Example of Execution Value
Advisory guidance may recommend:
- Defined patch SLAs
- Regular reporting
- Exception handling
MSP-led execution ensures:
- Patches are deployed on schedule
- Failures are remediated
- Reports are retained as evidence
SEBI inspections consistently treat patch management as a litmus test for operational discipline.
Access Governance: Where Advisory Often Fails
Advisors may design access control policies. But without execution:
- Ex-employees retain access
- Privileges accumulate silently
- Reviews are skipped
MSPs integrate access governance into:
- Joiner-mover-leaver processes
- Periodic access reviews
- Privilege monitoring
This produces tangible evidence trustees can rely on.
Incident Response: When Execution Matters Most
During cyber incidents, advisory models break down. What matters is:
- Speed of detection
- Quality of containment
- Accuracy of reporting
- Availability of evidence
MSP-led models ensure:
- Monitoring is active
- Escalation paths are clear
- Logs and timelines are preserved
SEBI and trustees evaluate incident handling as a governance stress test.
Vendor Risk: Oversight Without Operational Burden
Advisory firms may identify vendor risks, but execution often stalls.
MSPs support vendor risk by:
- Monitoring third-party integrations
- Managing access controls
- Supporting evidence collection
- Enforcing contractual security obligations operationally
This reduces blind spots without adding bureaucracy.
Why One-Time Audits Fail Without MSP Support
Audits validate a moment in time. Compliance requires:
- Sustained control operation
- Continuous monitoring
- Evidence retention
Without MSP-led execution, audit findings often recur year after year.
Trustees Prefer Execution-Backed Assurance
Trustees are increasingly sceptical of:
- Paper-only compliance
- Annual audits without follow-through
They prefer:
- Regular operational summaries
- Trend-based reporting
- Evidence of remediation
MSP-led compliance provides this naturally.
MSPs Reduce Fiduciary Risk for Fund Sponsors
Fund sponsors remain accountable under SEBI, regardless of delegation.
MSP-led compliance reduces fiduciary risk by:
- Ensuring controls are consistently applied
- Providing independent operational records
- Reducing reliance on individual employees
This strengthens defensibility during inspections.
Cost Efficiency: Execution Beats Rework
Advisory-only models often result in:
- Repeat gap assessments
- Recurring audit findings
- Emergency remediation before inspections
MSP-led compliance spreads cost over time and prevents rework.
Avoiding Over-Engineering Through Managed Execution
A key advantage of MSP-led compliance is proportionate implementation.
MSPs design controls that:
- Match fund size and complexity
- Focus on material risks
- Avoid unnecessary tooling
This is especially important for Category I and II AIFs.
How MSP-Led Compliance Aligns With SEBI Expectations
SEBI expectations revolve around:
- Reasonable foresight
- Ongoing oversight
- Evidence of care
MSP-led compliance directly supports these principles through execution.
Advisory Still Matters—But Not Alone
This is not an argument against advisory services. Advisory remains critical for:
- Interpreting regulations
- Designing frameworks
- Performing independent reviews
However, advisory without execution creates a false sense of compliance.
The Hybrid Model: Advisory + MSP Execution
The most effective AIF compliance model is:
- Advisory for interpretation and validation
- MSP for continuous execution
This hybrid approach delivers both credibility and sustainability.
How Infodot Delivers MSP-Led Compliance for AIFs
Infodot Technology specialises in IT managed services execution-driven compliance for AIFs under SEBI scrutiny.
Infodot supports AIFs by:
- Embedding compliance controls into daily IT operations
- Managing patching, access, endpoint, and monitoring controls
- Generating audit- and trustee-ready evidence
- Supporting incident response and reporting
- Translating advisory guidance into sustained execution
This allows fund sponsors to demonstrate compliance in practice, not just in principle.
Conclusion
For AIFs, the compliance conversation has shifted decisively from what should be done to what is actually happening. SEBI, trustees, and LPs increasingly judge funds on execution quality, not advisory intent.
Advisory-only models struggle because they rely on internal follow-through that lean AIFs are not designed to provide. MSP-led compliance works better because it embeds regulatory expectations directly into operations—producing continuous assurance, reliable evidence, and defensible outcomes.
In today’s regulatory environment, execution is compliance. MSP-led models ensure that AIFs can meet SEBI expectations confidently, sustainably, and without over-engineering their operating model.
FAQs
What is MSP-led compliance for AIFs?
Compliance where operational controls are executed continuously by an MSP, not left to internal teams alone.
Why is advisory-only compliance insufficient?
Because policies and frameworks fail without consistent operational execution.
Does SEBI prefer MSP-led models?
SEBI prefers demonstrable execution, which MSP-led models naturally provide.
Are MSPs accountable under SEBI?
Execution can be delegated, but accountability remains with fund sponsors.
Can small AIFs use MSP-led compliance?
Yes, MSP models are well suited to lean fund structures.
Does MSP-led compliance replace audits?
No, it strengthens audits by ensuring controls operate continuously.
Is MSP-led compliance more expensive?
Often less costly than repeated audits and remediation cycles.
Do trustees trust MSP-generated evidence?
Yes, when oversight and governance are clearly defined.
Can MSPs handle incident response?
Yes, with defined escalation and sponsor oversight.
Does MSP-led compliance slow fund operations?
No, it typically reduces operational friction.
Is advisory still required?
Yes, advisory complements execution but cannot replace it.
What controls benefit most from MSP execution?
Patching, access management, monitoring, and incident handling.
Are MSP reports accepted during inspections?
Yes, when aligned to regulatory expectations.
Can MSP-led compliance scale with fund growth?
Yes, it scales more easily than internal teams.
Does MSP-led compliance reduce fiduciary risk?
Yes, by ensuring controls operate consistently.
Is MSP-led compliance suitable for Category III AIFs?
Yes, especially due to higher risk exposure.
Can MSPs manage vendor security controls?
They can support oversight and evidence collection.
Do MSPs replace internal decision-making?
No, governance decisions remain with fund management.
Is MSP-led compliance regulator-mandated?
No, but it aligns strongly with regulatory expectations.
Does MSP-led compliance help LP due diligence?
Yes, it improves confidence through evidence.
Are MSPs responsible for policy creation?
They support implementation; policy ownership remains with sponsors.
Can MSP-led compliance prevent incidents?
It reduces risk but cannot eliminate all incidents.
Is MSP-led compliance continuous?
Yes, that is its primary advantage.
Does SEBI inspect MSPs directly?
No, but MSP outputs are reviewed during inspections.
Can advisory firms act as MSPs?
Rarely; advisory and execution require different operating models.
What is the biggest MSP-led compliance benefit?
Reliable, continuous evidence of control operation.
Does MSP-led compliance require more tools?
Not necessarily; discipline matters more than tools.
Can MSP-led compliance be customised?
Yes, controls are tailored to fund risk profiles.
Is MSP-led compliance suitable for new AIFs?
Yes, it establishes strong foundations early.
Do trustees expect MSP involvement?
Increasingly, yes, for assurance.
Can MSPs support SEBI inspections?
Yes, by providing evidence and explanations.
Is MSP-led compliance vendor-agnostic?
Yes, execution focuses on outcomes, not brands.
Does MSP-led compliance reduce audit findings?
Consistently, yes.
How does Infodot differ from advisory firms?
Infodot focuses on execution, not just guidance.
What is the key takeaway for AIFs?
Compliance succeeds when execution, not advice, is the foundation.
