As per the Securities and Exchange Board of India (SEBI), “Alternative Investment Fund or AIF means any fund established or incorporated in India, which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.”
An AIF raises funds from sophisticated investors, whether Indian, foreign or non-resident Indians, who undertake risk of investing in primarily unlisted or illiquid securities. Investment can be made in a joint setting if the investment partner is the investor’s spouse, parent or off-spring. No more than 2 individuals are allowed in a joint venture for AIF investment.
The minimum investment amount to be invested in an AIF is INR 1,00,00,000. AIFS are categorized as per the table below:
|CATEGORY I AIF||AIFs which invest in start-up or early stage ventures which the government or regulators consider as socially or economically desirable.
Examples: Venture capital funds (including angel funds), SME funds, social venture funds, infrastructure funds.
|CATEGORY II AIF||AIFs that do not fall in category I or category III and do not undertake leverage or borrowing other than to meet day-to-day operational requirements.
Examples: Real estate funds, private equity funds (or PE funds), funds for distressed assets.
|CATEGORY III AIF||AIFs which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives.
Examples: Hedge funds, PIPE Funds.
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