In India, alternative investment funds AIFs are represented in Law 2(1) (b) of Securities and Exchange Board of India SEBI Alternative Investment Funds Rules, 2012. It directs to any personally pooled acquisition fund, if from Indian or unfamiliar origins, in the formation of a syndicate or an organisation or a structure of enterprise or a Limited Liability Partnership LLP. Therefore, in this nation, AIFs are personal reserves that are elsewhere not within the jurisdiction of any particular regulatory mechanism in India.
What are alternative investment funds?
Alternative Investment Funds AIF varies from standard conventional assets like debt, stocks, securities etc. Alternative Investment Fund is a personally pooled acquisition vehicle that assembles funds from cosmopolitan confidential investors. In this investment strategies come in the category of diversification, volatility, better returns and passive income. This whole factor for a particular person to invest in an alternative investment fund for their personal development and growth in terms of capital belongs to them.
Properties of alternative investment funds
- AIFs contain venture capital, angel fund, hedge fund and private equity etc
- This does not reach in the list of the purview of SEBI mutual reserve rules
- Investors are free to allow to choose Alternative Investment Funds to invest purpose
- All Indians, which contain PIOs, NRIs, and OCIs, components are qualified to infuse in AIFs
Types of alternative investment funds
SEBI classifies alternative investment funds in three wider sections and that given below
Classification I AIF
- Venture Capital Funds
- Social Venture Capital Funds
- SME Funds
- Infrastructure funds
- Angel Funds
Classification II AIF
- Real estate Funds
- Debt’s fund
- Funds for distressed assets
- Private Equity (PE) Funds
Classification III AIF
- Private Investment in Public Equity Funds (PIPE)
- Hedge Funds
Comparison of alternative investment funds, Mutual fund and Portfolio management service
Alternative investment funds: this investment body has highly complex approach possibilities. In this investment, the amount of risk-reward is quite higher in comparison to Mutual funds. In this investment, the FM stability is generally managed by the owner of AIFs components. This whole factor for a particular person to invest in an alternative investment fund for their personal development and growth in terms of capital belongs to them.
Mutual funds: In this investment mechanism a very small margin of investment is required. It contains an admiringly tax-efficient component in the investment body. It is quite easy to access and operate. This investment is performed as withdrawal, systematic investment and transfer manner in the operation. Generally, it has low-risk diversified portfolios.
Portfolio management service: These investment mechanics typically differentiate kinds of approaches. In this investment, the risk factor is just similar to alternative investment funds. This contains customised possible portfolios in the operation of the investment. It gives the power to supervise the straightforward privilege of a stock factor in the function of investment. This investment generally deals with the FM stability which is owned by PMS`s component in the investment process.
Examples of alternative investment funds
The respective example which under in alternative investment funds, like Venture Capital Funds, Social Venture Capital Funds, SME Funds, Real estate Funds, Debt’s fund, Funds for distressed assets, Private Investment in Public Equity Funds (PIPE) and Hedge Funds are the favourable instanced of this investment mechanism
Uniform limit of alternative investment funds
This investment concerning Resident Indian people, Non-Resident Indians (NRIs) and foreign citizens can be funded in alternative investment funds. Correspondingly, there is a specific cap on the acquisition by individual investors. In this investment process, effective strategies are made to support the category of diversification, volatility, better returns and passive income. This whole factor for a particular person to invest in an alternative investment fund for their personal development and growth in terms of capital belongs to them.
The lowest acquisition allowed is INR 1 crore. Regardless, for administrators, workers and fund supervisors of the AIF, the lowest quantity is INR 25 lakhs. Further, the budgets determine the digit of investors for each assignment to 1,000. Nevertheless, for Angel funds, it is 49. Also, it is basic to understand that AIFs carry the lowest lock-in terms of 3 years. Type I and II are near-ended budgets, while type III might be either tight or unclogged-ended. Consequently, investors who are engaging and accommodating to diversify their respective acquisition portfolio by completing all the overhead provisions can subsidise in alternative investment funds.
Alternative investment funds investment has the smaller possibility to broadcast supportable interpretation data and promote to conceivable investors. Although alternative assets may contain elevated initial lowest and upfront investment expenses, marketing prices are normally more inferior to those of traditional investments due to more subordinate statuses of turnover. That is why many people in India are satisfied to invest in this investment mechanism rather than Mutual funds and Portfolio management service in terms of investment.