It can be a private equity, venture capital fund, hedge funds, debt fund.infrastructure fund, company or a Limited Liability Partnership (LLP).
There are three types of AIFs -
1) Category I - AIFs investing in ventures involved in social and economic growth at the initial stages. They get some incentives and concessions from government and regulatory bodies. They can be infrastructure funds or social venture funds.
2) Category II – Funds that fall neither in Category I nor Category III are Category II funds. These funds invest in ventures to provide for operations. They can be Private Equity funds or Debt funds. They do not get any special incentives or concessions from SEBI or the government.
3) Category III – These funds can be open ended funds or hedge funds that use different kinds of instruments or trading strategies for investment. They also do not get any special incentives or concessions from SEBI or the government.
- AIFs are currently regulated by SEBI (Alternative Investment Funds) Regulations, 2012 also known as AIF Regulations.
- Currently the minimum private investment is Rs. 1 crore. If the investor is an employee/director of the AIF or the Manager of the AIF, then minimum investment required is Rs. 25,00,000.
- A fund can have a maximum of thousand investors.
- The total investment should be at least Rs. 20 crore.
- Category I and III are closed ended funds and Category II funds can be closed ended or open ended.
- The minimum tenure of an AIF fund should be three years.
- As an investor, income earned from investments in AIFs is chargeable to income-tax in the hands of the unit-holder based on the income-tax slab they fall under.
As per SEBI data, more than Rs. 33,000 crore has been raised by AIFs since August 2012.
Here is a list of registered Alternative Investment Funds in India - http://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=16
A savvy investor with enough funds and following the modern portfolio theory that the investments should be diversified across markets and instruments to mitigate risks and maximise returns can consider investing in a suitable fund.