Alternate Investment Fund

According to Securities Exchange Board of India (Sebi), an Alternate Investment Fund or AIF is a privately pooled fund established or incorporated in India. It collects money from high networth investors (may include Indians, foreigners) to invest in a pre-defined fashion.

Example

A hedge fund, a venture capital (VC) fund

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AIFs has been categorised under three types by Sebi:-

AIF Category I

Includes AIFs which invest in start-up or early stage ventures, small and medium enterprises (SMEs), infrastructure, or any other sectors the government or regulator considers as socially or economically desirable.

VC funds, SME funds, social venture funds and infrastructure funds are some Category I AIFs.

AIF Category II

Includes AIFs which do not undertake leverage or borrow other than to meet the day-to-day operational requirements or the expenses as permitted by Sebi under its AIF Regulations, 2012.

Funds for distressed assets, private equity (PE) funds and real estate funds are some Category II AIFs.

AIF Category III

Includes AIFs which employ diverse or complex trading strategies and those that may employ leverage, through investment in listed or unlisted derivatives, for example.

Hedge funds are a Category III AIF.