Invest in a bouquet of handpicked assets via a privately pooled investment. AIFs follow an exclusive investment approach keeping in mind your exclusive wealth accretion objectives. With AIFs, you can invest in venture capital, hedge funds, private equity and private investment in public equity, to name a few.
AIFs are high ticket investments that can be structured using a mix of asset classes and instruments like listed equity, bonds, private equity, etc., to build a product that addresses very specific requirements.
When pitted against various other investment options, Alternative Investment Funds offer the chance of earning higher returns. The magnitude of pooled amount allows managers to prepare flexible strategies for optimising returns.
AIFs invest money in various assets, across different categories. Through diversification, AIFs can reduce asset-specific risks.
AIF has been broadly divided into three categories, per the Securities and Exchange Board of India (SEBI):
01
This type of AIF allows you to invest in SMEs, start-ups, and other financially viable corporations that show high potential for growth. This category includes funds like Venture Capital Funds, Infrastructure Funds, Angel Funds, and Social Venture Funds. Category I AIFs are close-ended funds.
02
Category II AIFs funds do not use leverage for any reason except to cover operational needs that are not covered under the other two categories. These include Debt Funds, Fund of Funds, Private Equity Funds and funds for distressed assets. These are also close-ended funds.
03
These comprise complex trading techniques and listed or unlisted derivatives. Private Investment in a Public Equity (PIPE) Fund and Hedge Funds are available under this category. Category III AIFs can be close-ended or open-ended.
Investors need to invest a minimum of INR 1 crore in AIFs. Investors who are directors or employees of the AIF-offering company can start AIF investments with a minimum of INR 25 lakh.
Mutual Funds must adhere to the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 and other regulations. Alternative Funds are not covered under these regulations. Also, the minimum investment for AIFs is INR 1 crore, making these investments viable for sophisticated investors. One can start Mutual Fund investments with amounts as low as INR 500, making them a viable option for most individuals.
Indian Residents, Non-Resident Indians (NRIs) and foreign nationals can invest in AIFs.
