- Category I funds invest in venture capital, startups, small and medium enterprises and infrastructure. They are closed-ended in nature, meaning they have a defined duration of existence (with a minimum of three years).
- Category II funds are all such funds that don’t fall under categories I and III (such as private-equity funds, debt funds, fund of funds). Like Category I funds, they too are closed-ended.
- Category III funds are those that employ complex strategies such as derivatives or use leverage to increase their returns. Examples of such funds include hedge funds or PIPE (private investment in public equity) funds. Such funds can be open-ended or closed-ended.
If you are a high net-worth individual and want to diversify your portfolio, AIFs offer you a way to look beyond debt and equity, and potentially earn greater returns than these traditional investments.
Diversify your portfolio: If you already have a strong portfolio of debt and equity, AIFs offer you a chance to look at new avenues to grow your wealth.
Returns: AIFs could potentially give you much higher returns than traditional investments, albeit at higher risk.
We offer a vast pool of AIFs, across all three categories. A dedicated relationship manager will help you chart your journey into the world of AIFs.
FACTBOX(https://www.livemint.com/market/stock-market-news/aifs-mobilized-commitments-worth-rs-82-228-cr-in-covid-year-11625245140261.html)
Alternative Investment Funds, or AIFs, are a category of specialised funds, which invest their corpus in asset classes beyond the conventional ones such as equity and debt. AIFs also invest in real estate, private equity, hedge funds, etc. These funds employ different trading strategies and investing approaches based on their objectives.
AIFs are specialised products targeted at high net-worth individuals. They require huge upfront investments (up to Rs 1 crore), while investors can start investing in mutual funds with as little as Rs 500. AIFs invest in many unconventional asset classes and employ highly complex trading strategies, while mutual funds tend to use a more conventional approach. Mutual funds are more tax-efficient than AIFs. AIFs have lock-in periods, while most mutual funds don’t. Finally, mutual funds allow a systematic investment plan, which is not possible with an AIF.
Those who invest in AIFs typically belong to the high net-worth group of individuals because the minimum investment is Rs 1 crore. Resident and non-resident Indians and even foreigners can invest in these funds.
AIFs invest in unconventional asset classes and are therefore suitable for those with a higher risk appetite. Also, AIFs require a high upfront investment so they may not be suitable for all types of retail investors. However, many AIF fund managers adopt complex risk mitigating strategies.
Retail investors must invest a minimum of Rs 1 crore in most AIFs. In the case of angel funds, the limit is Rs 25 lakh.
