An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that collects funds from sophisticated investors, both Indian and foreign, for investing in accordance with a defined investment policy. Unlike traditional investment options like mutual funds or stocks, AIFs invest in non-conventional assets such as private equity, venture capital, hedge funds, real estate, infrastructure, and even art or collectibles.
In India, AIFs are regulated by the Securities and Exchange Board of India (SEBI) under the AIF Regulations, 2012. These funds are typically suited for high-net-worth individuals (HNIs) and institutional investors, as the minimum investment requirement is ₹1 crore.
Category I – Invests in start-ups, SMEs, social ventures, infrastructure, etc., and enjoys SEBI incentives.
Category II – Includes private equity funds, debt funds, and other funds not covered under Category I or III.
Category III – Aimed at short-term returns through complex strategies like derivatives, arbitrage, and hedge funds.
AIFs offer a sophisticated investment route for those seeking higher returns through alternative strategies and niche markets. While they carry higher risk, the potential for reward is also significant, making them ideal for seasoned investors aiming for portfolio diversification and long-term wealth creation.
