{"id":17287,"date":"2022-10-07T18:29:00","date_gmt":"2022-10-07T12:59:00","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=17287"},"modified":"2022-10-07T18:29:00","modified_gmt":"2022-10-07T12:59:00","slug":"what-are-alternative-investment-fundsaifs","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/","title":{"rendered":"What are Alternative Investment Funds(AIFs)?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69da06330d3f7\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69da06330d3f7\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#What_are_the_types_of_alternative_investment_funds\" title=\"What are the types of alternative investment funds?\">What are the types of alternative investment funds?<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Category_I\" title=\"Category I:\">Category I:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Category_II\" title=\"Category II:\">Category II:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Category_III\" title=\"Category III\">Category III<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Frequently_Asked_Questions_FAQs\" title=\"Frequently Asked Questions (FAQs)\">Frequently Asked Questions (FAQs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#What_are_Alternative_Investment_FundsAIFs\" title=\"What are Alternative Investment Funds(AIFs)?\">What are Alternative Investment Funds(AIFs)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Why_should_you_invest_in_an_AIF\" title=\"Why should you invest in an AIF?\">Why should you invest in an AIF?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Who_is_eligible_to_invest_in_AIF\" title=\"Who is eligible to invest in AIF?\">Who is eligible to invest in AIF?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#What_is_a_debt_fund\" title=\"What is a &#8216;debt fund&#8217;?\">What is a &#8216;debt fund&#8217;?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#What_are_Angel_Funds\" title=\"What are Angel Funds?\">What are Angel Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/#Interested_in_how_we_think_about_the_markets\" title=\"Interested in how we think about the markets?\">Interested in how we think about the markets?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><span style=\"font-weight: 400;\">The term &#8220;Alternative Investment Fund&#8221; or &#8220;AIF&#8221; refers to any fund founded or incorporated in India that is a privately pooled investment vehicle that collects funds from sophisticated investors, whether Indian or foreign, for investing in accordance with a defined investment policy for the benefit of its investors.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/kuvera.in\/fixed-deposit\/all\"><img loading=\"lazy\" class=\"aligncenter wp-image-14483 size-large\" src=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/08\/fd-blog-01-1-1024x334.jpg\" sizes=\"(max-width: 640px) 100vw, 640px\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/08\/fd-blog-01-1-1024x334.jpg 1024w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/08\/fd-blog-01-1-300x98.jpg 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/08\/fd-blog-01-1-768x250.jpg 768w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/08\/fd-blog-01-1-150x49.jpg 150w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/08\/fd-blog-01-1.jpg 1080w\" alt=\"kuvera-fixed-deposit-online\" width=\"640\" height=\"209\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">AIFs are different from regular, conventional investments (asset classes) like stocks, debt securities, etc. An alternative investment fund is a privately managed investment vehicle that assembles capital from sophisticated private investors.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">AIFs include <a href=\"https:\/\/kuvera.in\/blog\/hedge-fund-vs-private-equity\/\">private equity<\/a>, venture capital, <a href=\"https:\/\/kuvera.in\/blog\/list-of-best-hedge-funds-in-2022\/\">hedge funds<\/a>, angel funds, etc. Additionally, AIFs are not subject to SEBI (Securities and Exchange Board of India) mutual fund restrictions. Investors that want to diversify their portfolios can invest in alternative investment funds. AIF investments are open to everyone who is an Indian, including NRIs, PIOs, and OCIs. They must, however, fulfil the requirements for eligibility.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_are_the_types_of_alternative_investment_funds\"><\/span>What are the types of alternative investment funds?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The Alternative Investment Funds are divided into three major categories by the Securities and Exchange Board of India (SEBI). Investors may register in any of the three categories listed below:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"Category_I\"><\/span>Category I:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">This category includes funds that invest in start-ups, small and medium enterprises (SMEs), and new companies that have a strong potential for growth and are considered to be both socially and economically viable. As these initiatives have a multiplier effect on the economy in terms of growth and job generation, the government encourages and promotes investment in them. Following are some subcategories under Category I AIF:<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Venture Capital Fund (VCF)<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Venture capital funds generally invest in startups that have a strong potential for growth but are experiencing difficulty raising capital during the early stages of their development and require money to establish or expand their business. Venture funds have emerged as the most popular option for new businesses and entrepreneurs seeking finance because it is usually challenging for them to get capital through the capital markets.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">VCFs collect funds from investors that want to engage in ventures on an equity basis. Depending on the company profiles, the size of the assets, and the stage of product development, they invest in a variety of startups. High net worth investors (HNIs) prefer to invest in VCFs when looking for high-risk\/high-return investment opportunities. According to their individual investments, each investor receives a share of the company that the VCF has invested in.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Infrastructure Fund(IF)<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The fund makes investments to develop public assets, including airports, communication infrastructure, road and rail infrastructure, etc. Since the infrastructure sector has high entry barriers and little competition, investors that are positive about the future of infrastructure development can invest in the fund.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The returns from an infrastructure fund investment can be a combination of capital growth and dividend income. The government may also offer tax benefits on investments made by an infrastructure fund in projects that are deemed to be desirable or viable from a social perspective.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Angel Fund<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">This fund is an example of a venture capital fund, where managers pool funds from a number of &#8220;angel&#8221; investors to invest in budding startups for their development. The dividends are paid to investors as and when the new businesses become successful.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">In the case of angel funds, the angel investors receive units. An &#8220;angel investor&#8221; is a person who wants to invest in an angel fund and who possesses business management expertise, thereby leading the startup in the proper way. These investors frequently invest in companies that are not supported by mainstream venture capital funds because of their growth uncertainty.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Social Venture Fund<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The Social Venture Fund (SVF), which often invests in businesses with a strong social conscience and the intention of making significant social change, was made possible by socially responsible investing. These businesses prioritize making money while simultaneously resolving social and environmental problems. Even though it is a charitable investment, one can still anticipate returns since the company would still make money.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The Social Venture Fund typically invests in initiatives based in developing countries because of their significant potential for economic growth and social change. Social venture funds offer companies technical and operational help in addition to startup funding. Additionally, they aid in company formation by establishing compliance and governance procedures. Additionally, if required, they provide commercial connections and assist in obtaining additional financing.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The social venture fund&#8217;s profits are split between the investors and the fund. Such investments also bring the best managerial techniques, cutting-edge technology, and significant experience to the table, making it a win-win situation for investors, companies, and society as a whole.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"Category_II\"><\/span>Category II:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">This category includes funds that invest in a variety of debt and equity securities. All funds that SEBI does not categorise under categories I or III come under category II. The government does not offer any incentives or concessions for investing in these funds.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The following are some subcategories under Category II AIFs:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Private Equity (PE) Fund<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Private equity funds primarily invest in unlisted private companies.\u00a0 Due to their inability to access financing through the issuing of equity or debt instruments, unlisted private companies search for PE funds. A PE fund typically has a fixed investment horizon ranging from 4 to 7 years.\u00a0 The company anticipates being able to exit the investment after 7 years with a sizable profit.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Debt Fund<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The alternative investment fund invests largely in debt or debt securities of listed or unlisted investee companies in accordance with the Fund&#8217;s stated objectives.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Debt funds, therefore, invest in companies that have sound corporate practices and room to grow but are experiencing financing constraints.\u00a0 An alternative investment fund is a privately pooled investment vehicle whose capital invested in a debt fund cannot be used for the purpose of providing loans.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>The following are the investment conditions and restrictions for Category II AIFs:<\/b><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Closed-ended schemes with a three-year minimum lock-in period.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Each scheme requires a minimum corpus of INR 20 crores.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investors must make a minimum investment of INR 1 crore. However, it is INR 25 lakhs for an AIF employee or director.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Only units of other AIFs or unlisted companies are acceptable investments for funds in Category II.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">They may invest in the units of other AIFs, excluding Funds of Funds.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These funds can borrow only to meet temporary requirements. Only loans of 30 days or less are permitted for Category II Funds. Furthermore, they are only permitted to borrow up to four times per year. The amount borrowed cannot exceed 10% of its investable funds.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Hedging is permitted for Category II AIFs.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The funds may participate in unsubscribed portions of an IPO by entering into a contract with the merchant banker.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These funds are not subject to SEBI&#8217;s insider trading regulations. This exemption is valid only for investments in SME exchange.\u00a0 However, such securities have a one-year minimum holding period.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Every six months, an independent valuer should conduct an evaluation of the funds under Category II AIF.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"Category_III\"><\/span>Category III<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Category III AIFs use a variety of trading strategies and leverage by investing in listed and unlisted derivatives. They engage in arbitrage, futures, derivatives, and margin trading. Closed-ended and open-ended funds are both permitted in category III funds. They are not as strictly regulated as traditional investments. As a result, they are not required to frequently publish their information. Additionally, there are no incentives or discounts offered by the Indian government for investing in these funds.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The following are some subcategories under Category III AIFs:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Hedge Funds<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Hedge funds invest in domestic and foreign markets through the pooling of private investors&#8217; capital. These funds invest the funds raised using a variety of trading and investment strategies. They hold both long and short positions in regular securities. Additionally, they have stakes in both listed and unlisted derivatives. Hedge funds employ aggressive management and leveraging techniques.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Hedge funds are vulnerable to increased market volatility. As a result, compared to traditional investments, the rewards and risks are typically higher.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li aria-level=\"1\"><b>Private Investment in Public Equity Fund (PIPE)<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">It is a privately managed collection of funds with private funding sources dedicated to investments in public equity. Private equity investment is the practice of acquiring shares of publicly listed stock at a discount. As a result, the investor can buy stock in the company, and the company selling the stock gains more funding for business expansion.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span>Frequently Asked Questions (FAQs)<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"What_are_Alternative_Investment_FundsAIFs\"><\/span>What are Alternative Investment Funds(AIFs)?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">AIFs, or alternative investment funds, pool capital from sophisticated private investors. The money raised is invested in line with the AIF&#8217;s investing strategy. AIFs are not subject to the <a href=\"https:\/\/kuvera.in\/mutual-funds\/all\">mutual fund<\/a> restrictions of the Securities and Exchange Board of India. AIF in India, however, is subject to Regulation 2 (1) (b) of the Regulation Act, 2012 of SEBI. In India, an AIF may be incorporated as a trust, corporation, Limited Liability Partnership (LLP), or other corporate entity.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">AIFs make non-traditional investment strategies (for example, equities or fixed income). The AIFs are divided into three major categories by the Securities and Exchange Board of India. Category I AIF, Category II AIF, and Category III AIF, respectively. According to the broad definition of the category, each of the categories includes a variety of investments. Some of these include angel funds, hedge funds, private equity, and venture capital. In comparison to traditional investments, AIFs have greater minimum investment and fees. AIFs don&#8217;t disclose any fund-related information to the general public.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"Why_should_you_invest_in_an_AIF\"><\/span>Why should you invest in an AIF?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Investment Alternative Funds AIF pools capital from sophisticated private investors. The money raised is invested in line with the AIF&#8217;s investing strategy. AIFs make non-traditional investment decisions (for example, in equities or fixed income). The AIFs are divided into three major categories by the Securities and Exchange Board of India. I&#8217;m talking about Category I, Category I, and Category III AIF. Depending on the broad definition of the category, each investment falls under a different category. Private equity, venture capital, hedge funds, angel funds, and so on are a few of them.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The following are the benefits of investing in AIF:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Diversification:<\/strong> AIF is a wise choice for diversifying a portfolio. The performance of AIFs generally does not dependent on the stock market performance.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Better Returns:<\/strong> Compared to other standard investments, alternative investments offer significant returns.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Passive Income:<\/strong> AIFs may provide investors with a reliable source of passive income.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"Who_is_eligible_to_invest_in_AIF\"><\/span>Who is eligible to invest in AIF?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Investors that want to diversify their portfolios can invest in alternative investment funds. They must, however, qualify for the same. Alternative investment funds are open to investments from resident Indians, Non-Resident Indians (NRIs), and foreign nationals. Also, there is a cap on the amount invested by each investor.\u00a0 The minimum investment allowed is INR 1 crore. The minimum investment for angel investors is INR 25 lakh. However, the minimum amount is INR 25 lakhs for the AIF&#8217;s directors, employees, and fund managers.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"What_is_a_debt_fund\"><\/span>What is a &#8216;debt fund&#8217;?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">A <a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/debt\">debt fund<\/a> is an alternative investment fund (AIF) that, in accordance with the fund&#8217;s stated objectives, principally invests in debt or debt securities of investee companies that are listed or unlisted. These funds are classified as Category II funds. In this regard, it is made clear that the money contributed by investors shall not be used for the purpose of making loans, as an Alternative Investment Fund is a privately pooled investment vehicle.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"What_are_Angel_Funds\"><\/span>What are Angel Funds?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">A venture capital fund that raises money from angel investors and makes investments in compliance with the guidelines in Chapter III-A of the AIF Regulations is referred to as an &#8220;angel fund&#8221; under Category I of Alternative Investment Funds.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">In the case of an angel fund, it shall only raise funds by way of issue of units to angel investors. &#8220;Angel investor&#8221; refers to any person who intends to invest in an angel fund and meets one of the following requirements:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">\u00a0An individual investor with net tangible assets of at least Rs. 2 crores, excluding the value of his principal residence, and who:<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><span style=\"font-weight: 400;\">has early-stage investment experience, or <\/span><\/li>\n<li>has experience as a serial entrepreneur, or<\/li>\n<li>has at least ten years of experience in senior management;<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">(&#8220;Serial entrepreneur&#8221; refers to a person who has promoted or co-promoted more than one start-up firm. &#8220;Early-stage investment experience&#8221; refers to prior experience investing in a start-up, emerging, or early-stage venture.)<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">a corporation with a net worth of at least 10 crore rupees; or<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">a VCF registered in accordance with the SEBI (Venture Capital Funds) Regulations, 1996 or an AIF registered in accordance with these regulations. An investment of at least Rs. 25 lakh from an angel investor must be accepted by angel funds for a maximum of three years.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Interested_in_how_we_think_about_the_markets\"><\/span>Interested in how we think about the markets?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Read more:\u00a0<a href=\"https:\/\/kuvera.in\/blog\/category\/zen-and-the-art-of-investing\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>Zen And The Art Of Investing<\/strong><\/a><\/p>\n<p>Watch\/hear on YouTube:<\/p>\n<p>&nbsp;<\/p>\n<style>.embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; }<\/style>\n<div class=\"embed-container\"><iframe src=\"https:\/\/www.youtube.com\/embed\/f7yfzUhQDiM\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><\/div>\n<p>&nbsp;<\/p>\n<p>Start investing through a platform that brings goal planning and investing to your fingertips. Visit\u00a0<a href=\"https:\/\/app.kuvera.in\/\">Kuvera.in<\/a>\u00a0to discover\u00a0<a href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/\">Direct Plans<\/a>\u00a0and\u00a0<a href=\"https:\/\/app.kuvera.in\/explore\/fixed-deposit\/c\/all\">Fixed Deposits<\/a>\u00a0and\u00a0<a href=\"https:\/\/kuvera.in\/user\/login\">start investing today.<\/a><\/p>\n<p>#MutualFundSahiHai #KuveraSabseSahiHai!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The term &#8220;Alternative Investment Fund&#8221; or &#8220;AIF&#8221; refers to any fund founded or incorporated in India that is a privately pooled investment vehicle that collects funds from sophisticated investors, whether Indian or foreign, for investing in accordance with a defined investment policy for the benefit of its investors. &nbsp; &nbsp; AIFs are different from regular, [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/what-are-alternative-investment-fundsaifs\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":11,"featured_media":17299,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[99,822],"tags":[1742,1743],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What are Alternative Investment Funds in India? - Kuvera<\/title>\n<meta name=\"description\" content=\"What are Alternative Investment Funds, Types of Alternative Investment Funds, Benefits of investing AIF Funds and Eligibility criteria. 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