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Alternative Investment Funds

Alternative Investment Funds (AIFs) are privately pooled investments managed by professional fund managers, targeting sophisticated investors seeking diversified strategies. AIFs can invest across equity, debt, and real estate, covering both listed and unlisted assets.

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About Alternative Investment Funds (AIFs)

AIFs require a minimum investment of INR 1 crore, as mandated by regulators, though certain strategies may demand higher commitments. While most AIFs are close-ended with a fixed tenure, a few select strategies offer open-ended structures, allowing for more liquidity. Tenures generally range from 3 to 12 years, aligning with the nature of the underlying strategy, risk profile, and investment horizon.

These funds are designed to cater to those looking for enhanced risk-adjusted returns, accessing diverse asset classes, and benefiting from active management and long-term growth potential which may not be available through Portfolio Management Services and Mutual Funds.

Benefits of Alternate Investment Funds

Minimise Risk through Flexible and Diverse Strategies

Better Returns from Focused, Quality Portfolios

Efficient Operations through Better Fund Structure

How does AIF regulation work?

In India, Alternative Investment Funds (AIFs) are regulated by the Securities & Exchange Board of India (SEBI), the governing body for the country's markets. SEBI has implemented a system for portfolio construction, valuation, and reporting of these funds on a periodic basis. These funds undergo regular audits with strict compliance measures to ensure transparency. The regulatory body is constantly working to improve the overall experience for investors and address any potential issues. Any new strategies for AIFs must be approved by SEBI and the Asset Management Company (AMC) before being offered. The AMC must be a registered entity and is required to allocate funds accordingly. Each AIF can have up to 1000 investors, with the exception of Angel Funds which have a maximum limit of 49 investors.

Who can invest in an AIF?

High-Net-Worth Individuals (HNIs)

With an Investable Surplus of 1 Crore & above

Institutional Investors

Entities like banks, insurance companies, pension funds, endowments, corporate & fund of funds

Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs)

Family Offices

For long term growth, alternative asset exposure and strategic diversification

Foreign Investors / Foreign Portfolio Investors (FPIs)

Access to Unlisted Indian Securities, and other alternative asset classes that are typically unavailable through traditional investments.

Angel Investors & Private Equity Investors

Access to Venture Capital Funds, SME Funds, Social Venture Funds etc.

Categories of Alternative Investment Funds (AIFs)

Category I AIFs

Category II AIFs

Category III AIFs

Getting Started with Alternative Investment Funds

Before you get started with AIFs, it’s important to understand the associated risks associated with Alternative Investment Funds. There are eligibility criteria put in place by regulators to protect investors.

There is a plethora of options available for you, and you should choose the fund based on your needs and risk tolerance. Investors should read the Private Placement Memorandum before investing.

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