Alternative Investment Funds (AIFs)

Pooled Investments made in venture capital, private equity, hedge funds, long short strategies etc. are called alternative investments. In other words, an investment not made in conventional investment avenues such as stocks, bonds, real estate etc. may be considered as alternative investments.

Alternative Investment Funds (AIFs) are defined in Regulation 2(1) (b) of SEBI (Alternative Investment Funds) Regulations, 2012. It refers to any privately pooled investment fund, in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP).

As per SEBI, AIFs are classified in three broad categories. Category I & II AIF are close ended & the tenure of the scheme is minimum three years. Whereas Category III AIF can be open ended or close ended.

Category I AIF
  • Mainly invests in start- ups, SME's, social ventures, venture capital, infrastructure or any other sector which Govt. considers economically and socially viable for the Indian economy.
  • Venture Capital Fund Infrastructure Fund Social Venture Fund Angel Fund
Category II AIF
  • These include Alternative Investment Funds such as private equity funds or debt funds which invest in equities and/or debt securities and which are not provided by any specific incentives or concessions by the government or any other Regulator.
  • Private Equity Fund Debt Fund Fund of Funds
Category III AIF
  • Alternative Investment Funds such as hedge funds or funds which trade with a view to make short term returns or such other funds for which no specific incentives or concessions are given by the government or any other Regulator.
  • Hedge Fund
  • Private Investment in Public Equities (PIPE) Fund