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Overview Of Alternative Investment Fund
Alternative Investment Funds (AIFs) are investment vehicles created in India that pool money from advanced domestic and international investors to invest in alternative assets, following a specific investment strategy. They are governed by the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012. AIFs form a unique asset class, providing investment options beyond the usual mutual funds, stocks, and bonds.
AIFs differ significantly from traditional investment options. They are tailored specifically for high-net-worth individuals (HNIs) and institutional investors, who must invest a minimum of ₹1 crore (with employees or directors of the fund allowed to invest at least ₹25 lakh). In contrast to mutual funds—which retail investors can access with amounts starting at just ₹500—AIFs are intended for experienced investors who can accept greater risk and prefer longer-term investments.
Types Of AIF
CAT I
AIF Cat 1 refers to Category I Alternative Investment Funds (AIFs) in India, which are funds that invest in socially or economically beneficial areas like start-ups, early-stage ventures, social ventures, Small and Medium Enterprises (SMEs), and infrastructure projects. These funds are often promoted by the government and are a way for investors to support growth in these sectors.
CAT II
AIF Cat II (Alternative Investment Fund Category II) refers to funds that are not classified in Category I or III and primarily invest in private equity, debt, or other similar assets without using leverage for speculative purposes. These funds target medium-to-long-term growth by investing in companies at various stages, with examples including real estate funds, private equity funds, and distressed asset funds.
CAT III
Non-discretionary PMS means a portfolio manager provides investment recommendations and advice, but the investor gives the final approval for all buy/sell transactions. This service is for investors who want professional guidance and research but want to retain full control over their portfolio decisions. The manager acts as an advisor, and the client must give explicit approval before any trades are executed.
Our Focus In Funds
Who Can Invest In AIF?
SEBI mandates a minimum investment of Rs. 50 lakh for Portfolio Management Services.
Open To All
AIF investments are available to Resident Indians, NRIs, and foreign nationals.
TIme Horizon & Liquidity
The minimum investment period is 3 years, during which there is no liquidity available for close-ended schemes.
Investor Limit
Typically, each AIF scheme can have a maximum of 1,000 investors, except for angel funds, which can include up to 200 investors.
Why Invest In AIF?
Access to exclusive opportunities
AIFs provide entry into investment classes that are otherwise difficult or inaccessible to individual investors, such as pre-IPO funding rounds or large infrastructure projects.
Tax Benefits
Depending on the category, AIFs can offer certain tax advantages. In India, for example, Category I and Category II AIFs often have a "pass-through" status, meaning income and losses (except for business income) are passed directly to investors and taxed at their individual level.
Potential for Higher Returns
Given the active management approach and flexibility, PMS can potentially deliver higher returns
Lower Market Volatility
Since AIFs are not directly tied to public stock market performance, they can offer more stability during times of market fluctuations. This makes them a potential buffer against overall market uncertainty.