What is an Alternative Investment Fund?

Alternative Investment Fund or AIF is a privately pooled investment vehicle that invests in alternative asset classes such as private equity, venture capital, hedge funds, real estate, commodities, and derivatives. Generally, HNIs (High net worth individuals) and institutions invest in the AIFs as the investment amount is substantially higher.

AIFs are regulated by the SEBI (Securities and Exchange Board of India). As per the SEBI (Alternative Investment Funds) Regulations, 2012, an AIF can be set up as a trust, a company, a limited liability partnership, or a corporate body. However, many of the AIFs that have been registered with SEBI are in the form of trusts.

Types of AIFs in India

SEBI has categorised Alternative Investment Funds into 3 categories:

Category 1

Venture Capital Fund (VCF)
Angel Funds
Infrastructure Funds
Social Venture Funds

Category 2

Private Equity Funds
Debt Funds
Fund of Funds

Category 3

Private Investment in Public Equity Fund (PIPE)
Hedge Funds

Who Can Invest in an AIF?

Investors willing to diversify their portfolio can invest in AIFs if they meet the following eligibility criteria:

Resident Indians, NRIs, and foreign nationals can invest in these funds.
The minimum investment limit is Rs. 1 crore for investors, whereas the minimum investment amount for directors, employees, and fund managers is Rs. 25 lakh.
AIFs come with a minimum lock-in period of three years.
The number of investors in every scheme is restricted to 1000, except angel funds, where the number of investors goes up to 49.

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