Alternative Investment Funds

Securities and Exchange Board of India (SEBI)

TYPES OF ALTERNATIVE INVESTMENT FUNDS

According to the Securities and Exchange Board of India (SEBI), AIFs are classified into three broad categories:

Why should you invest in an AIF?

High Net Worth Individuals (HNIs) who’re looking to expand their investment portfolio can consider investing in AIFs, as the return potential is very high, accompanied with an equivalent amount of risk. AIFs invest in securities that go beyond the traditional investments such as stocks, bonds, mutual funds, etc., paving a way for investors to expose themselves to alternative securities that deliver higher returns.

Who is eligible to invest in AIF?

Any sophisticated investor whether Indian, foreign or non-resident Indian is allowed to invest in an AIF, provided s/he has the required funds for investment, and is willing to bet on the unlisted and illiquid securities.

What is the minimum investment amount required to invest in an AIF?

All the categories of AIFs in India except angel fund require a minimum investment of Rs. 1 crore. For the angel fund, the amount is Rs. 25 lakh.

What is the corpus of the Alternative Investment Fund (AIF)?

“Corpus” refers to the total investment amount that the investors commit to an AIF, in the form of a written contract, or any document to the likes of it.

Are AIFs open-ended, i.e., open to subscription for the overall tenure of the fund?

Category I and Category II AIFs are supposed to be close-ended with a minimum tenure of 3 years. However, Category III AIFs have the option to be open-ended in nature

Is there any limit on the number of investors who can be a part of an AIF scheme?

All categories of AIFs (except angel fund) can have a maximum of 1,000 investors. Angel Fund can have a maximum of 49 angel investors. Also, AIF cannot make a public appeal to investors to subscribe to its units, and can raise funds only through private issuance of memorandum, and other means as such.