Investment Service

AIF

Alternative Investment Funds (AIFs)

The Securities Exchange Board of India (SEBI) classifies Alternative Investment Funds (AIFs) as privately pooled investment funds, categorized into three types: Category I, Category II, and Category III. AIFs diversify their investments beyond traditional asset classes like stocks, bonds, and fixed deposits. Fund of Funds (FOF) within AIFs aggregates funds from various High Net Worth Individuals (HNIs) and allocates them based on SEBI-defined investment categories, encompassing start-ups, SME funds, infrastructure funds, venture capital, private equity, and hedge funds.

Key Features of AIFs:

1. Investment Categories: AIFs invest in diverse asset classes, including both listed and unlisted derivatives, depending on the fund type.

2. Minimum Investment: Depending on the AIF category, a minimum investment of Rs 1.00 crore is required, catering to the High Net Worth Individuals.

Advantages of AIFs:

The primary advantage of AIFs lies in their flexibility and diversification beyond the constraints faced by traditional mutual funds. AIFs have the ability to explore non-traditional investment options, providing HNIs access to a broader range of opportunities.

Functionality of AIFs:

The primary function of AIFs is to mobilize capital for investments in non-traditional asset classes, allowing investors to access opportunities not readily available through conventional products like mutual funds. AIFs pool funds from various investor types, including resident and non-resident investors, foreign investors, and NRIs.

Investor Criteria for AIFs:

AIFs primarily target High Net Worth Individuals (HNIs) who are willing to assume significant risks and commit a minimum investment of Rs. 1.00 crore. While AIFs offer substantial potential returns, they also come with elevated risk levels, making them suitable for experienced investors rather than novices. Investors considering AIFs should be prepared to endure extended lock-in periods, demonstrating commitment to their investments.

In conclusion, AIFs provide a dynamic investment avenue for experienced and risk-tolerant investors seeking diversification beyond traditional asset classes. The stringent criteria for investors and the flexibility in investment options make AIFs a distinct category in the financial landscape.