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Alternative Investment Fund

Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle for investing it in accordance with a defined investment strategy or in structured investment product by the fund houses for the benefit of its investors.

Categories of AIF: There are 3 categories of AIF.

Category I AIF

o Venture Capital Fund
o SME Funds
o Social Venture Funds
o Infrastructure Funds

Category II AIF

o Real Estate Funds
o Private Equity Funds
o Funds for Distressed Assets

Category III AIF

o Hedge Funds
o Private Investments in Public Equity

Category 1 AIF

AIFs which invest in start-up or early-stage ventures, social ventures, SMEs, infrastructure, or other sectors which regulator thinks beneficial as socially or economically shall be considered as category 1 AIF.

Category 2 AIF

AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing, it may take borrowings but only to the extent of permissible limit or for operational requirements.

Category 3 AIF

AIFs which uses diverse or complex trading strategies and may use high leverage and can invest in listed or unlisted derivatives

Minimum Capital Requirement for Investing in AIF:

An AIF may raise funds from any High Networth Investor (HNI) whether Indian, foreign or non-resident Indians, who may be comfortable with risk and reward associated to investing in primarily unlisted or less liquid securities. However, the AIF shall not accept an investment of less than 1 crore from any of its investors.