All you need to know about alternative investment fund?
An alternative investment fund (AIF) is a privately pooled investment vehicle which collects funds from investors for investing in an asset class.
An AIF is not a conventional type of investment such as stocks and bonds. Alternative investments include private equities, hedge funds, managed futures, real estate, commodities and derivatives contracts.
AIF comes under Sebi (Security Exchange Boards of India) Regulations 2012 and covers investments which do not happen via the traditional modes of investment such as listed stocks and bonds.
These funds are typically set up as trusts, companies and limited liability partnerships. Under Sebi regulations, they can operate under three categories.
Category 1: These include infrastructure funds, venture capital funds, social venture funds and SME funds. Under this category, funds get government incentives.
Category 2: This include private equity funds, real estate funds, funds for distressed assets, and debt funds. These funds are not given any special incentives and concessions.
Category 3: This includes hedge funds. They are primarily aimed at high net worth investors, large institutional entities and corporates as the risk in this type of investment is high.
Sebi has, therefore, fixed the minimum ticket size for an AIF investment at Rs 1 crore.
Also, no AIF can have more than 1,000 investors, as per Sebi rules.
Sebi has also disallowed AIF from inviting public to subscribe to its units. Also, it can raise funds only through private placement.