Private Equity (PE) Fund: PE funds basically invest in unlisted private companies and take a share of their ownership. Since unlisted private companies can not tap capital through the issuance of equity or debt instruments, they look out for PE funds. Further, these companies present its investors a diversified portfolio of equities which essentially lowers the risk to the investor. A PE fund typically has a fixed investment horizon ranging from 4 to 7 years. After 7 years,the firm expects that it would be able to exit the investment with a good amount of profit.
Debt Fund: This fund primarily invests in debt instruments of listed as well as unlisted companies. Companies that have low credit scores generally release high yield debt securities accompanied with high risk. So companies with high growth potential, good corporate practices but facing capital crunch can be a good investment option for debt fund investors. As per the SEBI regulations, the amount invested in Debt Fund cannot be utilized for the purpose of giving loans, as Alternative Investment Fund is a privately pooled investment vehicle.
Fund of Funds: As the name suggests, this fund is a combination of various Alternative Investment Funds. The investment strategy of the fund is to invest in a portfolio of other AIFs rather than making its own portfolio or deciding what specific sector to invest in. However, it should be kept in mind that Fund of Funds under AIFs cannot issue units of fund publicly, unlike Fund of Funds under Mutual Funds.
