Alternative Investment Funds in India

Sunita Rao, CFA

Chartered Financial Analyst | International Commercial Arbitrator | Fellowship in Life Insurance | AIF | PMS | Mutual Funds |

What are Alternative Investment Funds?

Alternative Investment Funds (AIFs) are a class of investment funds that are created for the purpose of investing in assets other than traditional investments such as stocks, bonds, and cash. In India, the Securities and Exchange Board of India (SEBI) regulates the AIFs under the SEBI (Alternative Investment Funds) Regulations, 2012.

Types of AIF in India

Category I AIFs: Include funds that have a positive impact on society or the environment, such as venture capital funds, social venture funds, and infrastructure funds. These funds are subject to fewer regulations and are given a higher degree of flexibility in their operations.

Category II AIFs: Include hedge funds, private equity funds, and real estate funds. These funds are subject to a moderate degree of regulation and are required to disclose certain information to investors.

Category III AIFs:  Include all other types of AIFs, such as angel funds, debt funds, and PIPE (private investment in public equity) funds. These funds are subject to the most stringent regulations and are required to disclose the most information to investors.

The AIFs in India have been gaining popularity in recent years, as more and more investors are looking for ways to diversify their portfolios and invest in assets other than traditional stocks and bonds. AIFs can provide investors with the opportunity to invest in new and emerging sectors, such as technology, infrastructure, and renewable energy, which can offer higher returns than traditional investments

In conclusion

Alternative Investment Funds (AIFs) in India are regulated by SEBI and fall under 3 categories, Category I, II and III. These funds are gaining popularity among investors as they provide diversification and an opportunity to invest in new and emerging sectors.