Alternative Investment Funds

Categories of AIFs

Category I AIFs

Category I AIFs invest in start-ups, early-stage ventures, and sectors that are socially or economically beneficial. These funds often receive government incentives and support for their developmental focus. These include venture capital, angel, SME, social venture, and infrastructure funds.

Category II AIF

Category II AIFs include funds that do not fall under Category I or III and do not undertake excessive leverage or borrowing beyond day-to-day operational requirements. Their investment focus is on established businesses, private equity stakes, real estate, strategic debt investments. Includes private equity, distressed assets, real estate, and debt funds.

Category III AIFs

Category III AIFs employ complex and diverse trading strategies and may use leverage, including investments in listed or unlisted derivatives. These include hedge funds and PIPE (private investment in public equity).

Benefits of investing in AIFs

Unlock Unique Investment Opportunities

Alternative Investment Funds enable participation in niche markets like venture capital, private equity, and hedge funds, providing access to exclusive opportunities that traditional investments cannot offer and the benefit of strategic diversification.

Potential for Higher Returns

By investing in high-growth, non-traditional assets, AIFs offer the potential for significantly higher returns compared to public market investments.

Advanced Fund Management

Your portfolio is managed by seasoned investment professionals who use their deep market expertise to develop customized strategies for exclusive asset classes.

Maximizing Tax Benefits

Many AIF structures (specifically Category I and II) are tactically designed for tax efficiency, offering a "pass-through" status that prevents double taxation. Category III structure offers fund level taxation which reduces the burden on investors to maintain records.

FAQs on Alternative Investment Funds(AIF)

Your Questions, Answered

AIFs are privately pooled investment vehicles that collect funds from sophisticated investors to invest in a variety of non-traditional assets, including venture capital, private equity, hedge funds, real estate, pre-IPO, and debt instruments. AIFs are regulated by the SEBI. It’s for ultra HNI and HNI investors seeking exclusive investment opportunities for higher returns. It is an avenue for investors to go beyond the ordinary and access opportunities not available in traditional markets to a common investor.

AIFs are typically suitable for ultra high-net-worth individuals (HNIs), HNIs, family offices, banks, insurance companies, corporate treasuries, and other sophisticated investors looking for higher returns and portfolio diversification.

Benefits of investing in AIFs include:

Strategic diversification of your portfolio beyond just equity markets.
Access to exclusive and unique investment opportunities.
Potential for higher returns.
Portfolio expertly managed by seasoned investment professionals.
Tailored strategies aligned with your goals and risk profile.
Opportunity to build a portfolio across asset classes while managing risk

The minimum investment amount is INR 1 crore for investors. Please contact our team for detailed information.

The tax treatment of AIFs varies based on the category of the fund. Category I and II AIFs are pass-through vehicles where income is taxed in the hands of investors. Category III AIFs are taxed at the fund level, and investors are not directly taxed on the fund’s income.

Yes, AIFs are regulated by the Securities and Exchange Board of India (SEBI). They operate under a regulatory framework designed to protect investors’ interests and ensure transparency in operations.

AIFs come in various forms, each designed to meet different investment objectives. Here’s a brief overview of some key AIF types

Performing Credit AIFs
Focus on secured lending and investing in performing credit assets, offering steady returns by targeting companies with strong credit profiles.
Real Estate AIFs
Focus on investments in real estate projects or companies, offering opportunities for capital appreciation and rental income.
Pre-IPO AIFs
Invest in companies that are expected to go public soon, offering early access to potentially high-growth opportunities.
Private Equity AIFs
Invest in private companies, providing capital for growth, buyouts, or restructuring, with the aim of realising significant returns upon exit.
Venture Capital AIFs
Focus on investing in companies that are not yet listed on any stock exchange, often in niche or emerging sectors.
Special Situations AIFs
Target unique opportunities arising from corporate restructurings, distressed assets, or other atypical situations, aiming for significant returns by capitalising on market inefficiencies.
Equity AIFs
Invest primarily in listed equity shares, targeting capital appreciation over the long term.
Multi-Cap AIFs
Invest across companies of varying market capitalisations—large-cap, mid-cap, and small-cap—providing a diversified equity portfolio that balances growth and stability.
Multi-Asset AIFs
Allocate investments across various asset classes such as equity, debt, and real estate, offering diversification and balanced risk-adjusted returns.
Hedge Funds AIFs
Employ advanced investment strategies, including leveraging, short-selling, and derivatives trading, to generate high returns across different market conditions.
Fixed Income AIFs
Focused on generating steady returns through investments in bonds, debentures, and other debt instruments.

Yes, AIFs typically have a lock-in period that varies depending on the specific fund. This period is designed to match the investment horizon of the underlying assets and strategies. Investors should carefully consider the lock-in period before investing.

What are AIFs?